Let’s rewind, take a stroll down memory lane, and sift through 2017’s housing data…
Days on the Market and Inventory
The new year is here, but it forgot to bring new homes for sale along with it! The following two charts go hand in hand and help influence the median sale price. Notice any similarities? As buyer demand increases and the average days on the market decreases, inventory usually drops with it.
Dial back to 2012 and you can see we were in a neutral market and average days on the market were in the upper 60’s. Fast forward to the end of 2017 with inventory for detached, single-family homes at literally the all-time low. December saw a mere 800 detached and 839 attached homes (condos, townhomes) available for sale. That leaves Denver with a puny 1.5 months of inventory; still a strong seller’s market, with average days on the market lingering in the mid 20’s.
Inventory, nothing new here…
And the best real estate agent quote from the last five years goes to… “it’s a seller’s market!” Barring any domestic or global financial crisis, our inventory will remain low until Denver focuses on creating more “affordable” housing (i.e. dense condo projects). The city and state leaders need to make condo defect law reform a top priority for 2018. Stop putting bandaids on it. It’s time for a complete overhaul with both sides coming to the table to find a compromise that spurs condo development. If we can add 10-12k apartment units this year, there is absolutely no reason why we can’t increase our condo unit delivery rate to half that number by 2020.
Interest rates started the year at 4.2% and bottomed out slightly above 3.8% in September. We’ve seen a constant increase in the rate which has started to follow the Fed rate hikes (March, June, and December) in 2017. They have hinted at increases in 2018, so we would expect rates to continue to creep upwards as the year progresses.
Putting things into context, the interest rate has been flirting with historical lows for the past five years. When financing a home, it can be stressful when it comes to locking in a rate. Our advice? Rely on your lender’s experience and council… most of them know what they’re doing! Trying to time your rate lock is a lot like day trading in the stock market — sometimes you win, sometimes you lose. We also suggest taking this approach: lock in your rate and then don’t look back until you’ve been in the home for a year. Then, start keeping track of what rates are doing and if you are noticing that rates are trending below your current rate, call your lender and start the refinance discussion to see if it saves you $$$!
Now for price…
Again, no surprises here. The median sale price pretty much goes the opposite direction of average days on market and inventory. The median price for detached homes has reached whopping $435k, with attached properties coming in hot at $337k. This is an 8.8% increase of (that’s $35,000, an equivalent of roughly $165 per month on a 30-year mortgage) since this time last year and a 61% increase from five years ago.
This is an area that we need to stop setting records in and why city and state leadership must get moving on this <insert broken record comment here>. Denver must not become a city that only the wealthy can live in. Our city is struggling with the cost of housing (can we get an amen?!). Recent discussions have started on the grass roots level and we hope to see this gain momentum and put pressure on the top to make a real change.
We’re going to land the plane with one last topic:
Amazon H2Q and Denver
You may be wondering how this has anything to do with a 2017 recap report. The famous quote credited to George Santayana states
Those who do not learn history are doomed to repeat it.
In this case, we should edit the quote to read, “Those who do not learn from Denver’s housing statistics are doomed to an unaffordable housing market.” If Denver is successful in winning the H2Q race, it will have a major impact on our housing market, cost of living, and overall economy. Seattle is the test bed for what could happen to the “winning” city Amazon selects. July’s home prices in Seattle increased by 13.5% year-over-year. For comparison Denver wasn’t that far behind, with a 9.2% increase, without Amazon! Keep in mind Amazon is bringing 50,000 high paid workers who will need to either rent or buy a house, so we would expect that number to reach or exceed Seattle’s numbers. We could go on, but you get the point. It’s definitely worth a conversation before we change Denver forever.