More than one out of four homes in the Denver area placed under contract in May failed to close, according to an analysis of a monthly report on homes sold by Realtors.

The 25.81 percent “fallout rate is staggering,” said Larry McGee, president of the Berkshire Group, who for the first time analyzed that aspect of the market.

He found that the rate of homes not closing is twice what it was in May 2006, when the rate stood at 13.81 percent, and 46 percent higher than the 17.68 percent rate in May 2007.

However, it is not the worst rate. In September 2007, the fallout stood at just above 40 percent and actually has declined slightly from March and April.

“It will improve,” McGee said, as “consumer confidence strengthens.”

“This level of fallout produces a considerable strain on both buying and selling consumers, Realtors, lenders, and the entire resale service industry,” he said.

Independent broker Gary Bauer, who also prepares a monthly report based on Metrolist data, said deals that aren’t consummated fall into three camps: buyer remorse, homes not passing inspection and buyers not qualifying for loans under the stricter underwriting standards.

Buyers often ask for repairs or improvements that the seller considers unreasonable or too costly, McGee said.

“The average buyer, smelling blood in the water, feels that the average seller is desperate to sell,” McGee said.

Sellers are having trouble unloading homes at a time when the record number of foreclosures on the market are driving down the median and average prices.

The median price of a single-family home dropped almost 10 percent to $226,500 from $251,155 in May 2007, while the average price of a single-family home fell by 15 percent to $276,374 from $318,904 in the same period.

However, that can spell opportunities for people who previously had been priced out of the market.

Bauer said he is helping a family of five buy a foreclosed home in Commerce City for $70,000, which previously sold for more than $163,000, almost a 60 percent drop.

In 2005, homes priced under $100,000 accounted for 3 percent of the homes sold, Bauer said.

“Today, they account for about 13 percent of the mix,” Bauer said. “That’s what foreclosures have done to the market.”

http://www.rockymountainnews.com/news/2008/jun/05/denver-area-home-prices-continue-slide/

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