Denver, CO – Buyers are Ready to Act, Fearing that

the Best Deals are Drying Up

 

(3,704 single-family permits in 2010, 24th largest market in the country)

 

Dwindling inventory creates some urgency for buyers. Our buyer traffic index

improved again in December, reaching 46 from 42 in November. This is essentially in-line

with a neutral reading of 50, indicating traffic levels in-line with agents’ expectations for this

time of year. Our index has climbed steadily since bottoming out in August and is now at

the highest levels since the tax credit-fueled spurt in April 2010. Agents widely cited the

declining level of quality listings as causing the higher traffic levels, as potential buyers

finally have some reason for acting with urgency. One agent noted, “Showing traffic and

interest are surprisingly strong for this time of year. Inventory is way down in some

segments so buyers have a lot less to choose from. If it is a good listing the offers are

coming in.” Another commented, “Housing inventory is very low. Buyers don’t have much

to choose from.” As a result, one agent said, “People may be realizing the good deals on

homes and mortgages will not likely last.”

Home prices moving closer to stabilization as demand picks up and inventory falls.

Our home price index improved to 42 in December from 36 in November, moving closer to

a neutral reading of 50, which would indicate stable prices. We think prices will likely

continue to firm near-term, assuming the current demand and inventory trends persist.

Inventory levels continued to fall in December, as our home listings index increased to 83

from 81 in November, well above a neutral reading of 50, the fifth consecutive month in

which our index has exceeded a level of 70. In a positive sign for home prices, our time to

sell index jumped to 58 in December from 44 in November, above a neutral reading of 50

indicating a shorter length of time needed to sell a home as compared with the prior month.

This is the first time our time to sell index has exceeded 50 since April 2010, which is

typically a positive leading indicator for home prices.

Comments from real estate agents:

“Lack of homes for sale has increased showings on homes now listed. New on the market properties are selling quickly.”

“People are starting to buy more. Seem more confident.”

MDC Holdings has the greatest exposure. MDC Holdings has the greatest exposure to

Denver, which generates approximately 16% of its sales, followed by KB Home and

Meritage at 4% each. D.R. Horton has approximately 2% exposure.

Exhibit 10: Better Demand and Lower Inventory Lead to a Shorter Time to Sell, a Positive Sign for Pricing