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In 1816, the winter seemed to never end. In New England, ice on river banks was still visible in July and August. The year came to be known as ‘1800 and froze to death’ or ‘the poverty year’. It seems 2008, while much warmer and comfortable temperature wise, will be the year of poverty for many in the real estate industry. The year the real estate market never really came out of the winter slow down.

The real estate market usually is subject to certain cyclical phenomena that vary by area. In Denver, winter usually brings a slowdown in the real estate market, marked by slightly lower prices and sales volume. Typically as early as January or February the seasonal market begins to turn around. Well..not this year.

This chart is a stochastic representation of real estate sales prices over the last couple years. I love technical analysis, almost to a fault. In evaluating stocks, charts like these help traders identify trends and compare the current market price to past prices to identify opportunities. To keep it simple, when the blue line crosses up through the red line, this marks the best time to buy in the market. When the blue line crosses down through the red line that’s when you should sell. When prices go one way when the stochastic suggests another, that’s when there might be a trend reversal coming.

Imagine how many REALTOR friends you would have if you bought and sold that often. Thankfully, this model is usually only applied to stocks. A stock’s liquidity makes it possible for it to be bought and sold in shortened time spans. While it is a poor tool for evaluating the length of a trend and potential buying opportunities, it’s great at determining cycles and safer entry and exit points.

Here are a few things you might notice by examining your market in this way.
1. When is typically the best time of year to buy a home? If we look at the chart, it becomes obvious that the best time to buy a home would be between August and February. Of course, if you look at the actually sales stats, you would notice that August might just be the best month to buy a home during the year because not only is there a slight drop in pricing, there is a larger supply of homes to chose from. Deep down, I would never suggest that you rely on the time of year as the number one reason to buy or sell a home, but it always helps to know where you’re at in the cycle so you know what to expect.

2. How has the credit crunch affected home sales in Denver? From my observations, the availability of credit for lower income and even middle income buyers with lower credit scores has significantly slowed the market. Notice how the chart shows a longer, flatter curve all the way into April (2008) compared to previous years with the market bottoming between December and February. This means sellers can expect continued pressure on high home prices. It doesn’t mean things aren’t selling, it just means your going to need to work harder, show better and price lower than you used to.

3. How long will this last? Who really knows. I wouldn’t expect to see stability return next year at this time without significant improvements in the economy. (I here Microsoft wants more sun and is considering Denver…not really but that’s the instant boom I’m looking for.) Additionally, if REALTOR’s out there still think next year will be better, think again. Foreclosures are driving the market down by far out weighing the slowing local economy. Until lender owned inventory starts drying up, expect more of the incredible buying opportunities and poor selling prices. That being said, I’m keeping an eye on the price of ownership when compared to renting, the ratio of home prices to median income, the economy and inflation. There are encouraging signs and improving signs in many of these statistics.

If you saw one of my previous posts regarding the real estate bubble, you would know I don’t believe Denver is a true bubble candidate and thus has a shorter fall. I would expect that prices would continue to decline through Spring of 2009 finally bottoming during that Summer. I wouldn’t expect an immediate recovery either. Prices will likely stabilize before racing back up. Denver homes will start to look pretty affordable by spring of 2010. To arrive at that, you have to make a few leaps of faith regarding inflation, demand and foreclosures peaking this summer. But I’m sure I’m still more accurate than NAR’s method.
Sometimes though, an opportunity can come along that would likely never come again. Housing is very inconsistent and resists almost every opportunity to have an absolute value price. Most great opportunities will appear only for a couple of days before a savvy waiting investor would pounce. At this moment there are hundreds of homes in Denver that didn’t last a week on the market before being snatched up. If it’s a good deal, it’s a good deal. Who cares if you could of saved $5000 here or there when you get what you want and it has a great long term outlook either for you and your family, your pocket book or both?

Not to mention, the smart money loves these down turns. They need them to get into positions they couldn’t normally get into in strong upswings.

A long bottom can represent a real opportunity for some people in some areas. Of course, in most instances, we don’t usually refer to ourselves as the smart money, though we all wish it to be true.

or at least trying to. I’ve been busy expanding some ideas I have with internet technologies. As such, I haven’t been completely focused on writing much lately but I’m still here. I’ve been working on expanding my very limited programming background. I’ve been learning web development and have been trying to pick up as much as I can before it all changes. Outside of the classes I’ve been taking, I think I’ve actually made some progress. I don’t really enjoy formal classes. I find that it’s usually structured in such a way as to not teach you enough to move forward on your own. When it comes to technology, it seems a typical local college just doesn’t have the ability to keep up with what’s new. And of course, my biggest peeve: colleges like to separate crucial components in such a way so as to fill their 30-40 credit requirements for a certain program of study overcomplicating the learning process so they can sell you more classes. You would think you would go through a class that covered the subject broadly early on, perhaps building a web application without going into much detail of every little thing. That way, as you continue down the road, you’ll have a better grasp of where each technology comes in to play. Of course, if you knew that, you could probably just pick up a book on the subject.

So what have I learned so far? I’ve learned enough C++ to know that I hate when things become very tedious. That really helped with pushing me towards learning more about Ruby and Ruby on Rails. I was able to use C++ for an actual application though. I wrote a parser to convert an online directory of addresses to a comma delimited file so it could be used to create mailing labels. Pretty exciting stuff isn’t it.

I learned more HTML and CSS. No time wasted there. Besides all the CSS you come across playing around with blogs, you can also use it to help with designs of actual websites. Who knew? Hopefully, my site, ValueRents.com will be online sooner than later. That’s the website I’ve been working on in a round about manner for a couple of years. I dusted the concept off and developed a frontend for the site but still need to plug in some sort of backend. One day ValueRents.com will help landlords find the best properties then manage their rental properties from one location. I apparently have a few more things to figure out before it all comes together. I might make some attempts to redevelop the theme for this site. How hard could it be?

And to wrap it all up, a few classes in database design and SQL. I got to tell you, there’s nothing like bending raw data to your every whim. Hours of fun. I can’t even begin to explain how happy I am to finally stop using Excel to run calculations on the thousands of foreclosure records I have. Mysql and SQL Server are so much more fun. So maybe I can start using Excel for what it was intended–spreadsheets and quick and dirty charts.

So that’s what I’ve been up to while the real estate megalith cracks and crumbles. I’ll have more on that in coming posts. I can’t help but think though, where there are problems, there is an opportunity. I haven’t seen such great deals in Denver real estate since I moved here 8 years ago. Hopefully, the web development education I’m giving myself will help me take advantage of the dozens of opportunities I see every day. Time will tell.