The Real Estate Market

Numbers to know.

Denver home inventory ticking up slightly

The average number of days homes in Denver spent on the market in June was the lowest it’s been in the last ten years — 14 days! Available home inventory also crept up ever so slightly to 1.2 months, from 1.1 months in May. It’s not much, but we’ll take what we can get these days. Buyers have been waiting a long time for more homes to hit the market, and finally, they have! The number of active listings increased by 22.7% since last month. On the flip side, over this same time period, buyer demand increased by 11%. If interest rates start creeping up, buyer demand will begin to wane and we’ll likely see a small surge in new listings from those who have been on the fence to sell. If you’ve been waiting to list your home, now is the time to take advantage of our hot market before it cools off.

Want more detailed information about the market in your neighborhood? Please reach out!

As prices set new records, why aren’t Denverites selling their homes?

The median sale price has hit an all-time high of $653,000 in Denver. Inventory continues to decrease, and 1,464 homes sold in May, which is 6% above the last five-year average. Active listings were also down 20% in May. People aren’t selling their homes. The question is, why?

Denver is becoming one of the most expensive cities in the country. The median sale price has increased by 31% over the last three years with no sign of cooling off. Traditionally, sellers move every few years for various reasons — size requirement changes, a neighborhood change, or a lifestyle or work change. People are now staying put because they cannot afford their next home in Denver or fear being unable to secure a new home.

Want more detailed information about the market in your neighborhood? Please reach out!

Questions about the Denver real estate bubble that keep us up at night

How long will our fierce, low-inventory, deep seller’s market last? Will it slowly ramp down or will it crash overnight? Are we keeping up with new construction? These are the questions that keep real estate professionals and home buyers up at night!

How is inventory looking?

Every day I look over new homes that hit the market for our clients, a task that used to take up the length of a nice cup of coffee. Now, I can’t even finish my coffee before I run out of properties to view! Over the last seven days, there have only been 204 new listings in Denver and 411 have gone pending. Typically, we measure inventory in months, but we are just shy of 40 days of inventory — days! Denver had 318,445 households as of 2019. An average of 29 homes hit the market each day, which means that only .002% of Denver households are hitting the market each month. Things are certainly tightening up.

How are rising interest rates affecting the market?

As interest rates go up, buyers in the lowest price ranges find themselves forced out of the market. As more of a monthly payment goes toward higher interest rates and not towards purchase power, everyone is shuffled down the totem pole. This reshuffling will reduce buyer demand, but not enough to reshape inventory and get us to a balanced housing market. To significantly increase inventory levels to quell increasing prices, work must be done on the supply side of the equation.

(P.S. We’ll be keeping an eye on the 10-year treasury rate, which mortgage rates have historically been tied to. Glen Weinberg at Fairview Commercial Lending recently published a great write up on the recent inflation jump reported on this month’s CPI Index report and what that means for real estate.)

Can we turn to new construction?

This is where Denver has a severe disadvantage to other cities where “urban sprawl” is an option. Denver is locked in by other municipalities and unable to develop large tracts of land. We aren’t the only city with this problem; as a nation, home building has dropped significantly over the last decade, from an average of 26.3 million homes built per decade from 1970-2010, to only 5.8 million new homes built from 2010-2019. That’s a 77.8% change in the wrong direction! Denver needs new homes to add to the inventory to supplement existing home sales. The city can’t build out, so we have to build up. Increasing density via high- to medium-rise condominium development and finding a compromise to construction defect laws must happen.

Will the market crash?

Lending practices have been corrected since the great housing crash of 2008 and those buying homes are now generally well-qualified. As interest rates increase, I do believe things will start to slow down, but not crash. I mean, we are living through a pandemic that has rocked the world and our housing market is still going straight up! Now, we just need homes to build upwards as well.

April 2021 stats recap: Denver home bidding wars continue to drive up prices

I recently read an article published online by a Denver television network. It was titled: “Home out of range: 65% of Denver homes sell over asking price.” As I began to read, I didn’t even make it through the first sentence before I was met with disappointment. It started, “Littleton, Colorado…” So which is it, Littleton or Denver? Being a stats geek, I had to find out the actual number of Denver listings that closed at or above list price last month, in addition to pulling monthly stats (see below).

We’ve all heard the bidding war stories that are floating around and I knew the number would be high, but the numbers really were astonishing. In April, there were 1,519 homes that closed, and of those, 1,215 sold at list price or above. That means that a staggering 79.9% of homes sold at or above list price! Let that sink in a bit — now it makes even more sense why the median sale price for single family homes jumped another $20k from March, up to $650,000. 😳

Want more detailed information about the market in your neighborhood? Please reach out!

Denver housing market up 18.8% since January

Interest rates are back above 3% again, and the Denver housing market didn’t even notice! In fact, the bidding wars that everyone keeps talking about (which are real) have pushed the median sale price for single family homes past 600K, a record high for Denver and an 18.8% increase since January. Inventory, typically measured in months, was down to 1.06 months in March. There is so much pent-up buyer demand that I believe we’ll soon be measuring it by weeks. This is going to be another fast-paced, multiple-offer summer unless we start seeing a large number of listings hitting the market soon.

Want more detailed information about the market in your neighborhood? Please reach out!

How the -bleep- to buy a home in Denver today

If you are buying a home in Denver right now, you already know how tough the competition is. In fact, most buyers have to submit several offers before they finally get one accepted. We’ve been talking (a lot) about our ridiculously low inventory, the increasing home prices, and the speed at which homes sell. It can be discouraging to say the least, but what’s really happening out there? We dove into February’s closings and here’s what we found out.

Median Original List vs. Close Price

We broke down several price brackets to look at the median close price versus the original list price for single family homes (the original list price is the price a home is first listed at on the market before any price adjustments; the close price is what the home actually sells for). It’s not a surprise, in our current market, that every price group sold above its original list price. If you are one of the lucky ones who’s come out on top this year with a signed contract, you’re probably wishing that these median differences were all that you paid over list price! Again, I want to point out this is the median for all sales within a given price range in Denver. This means that the ridiculously overpriced home that sat on the market for eight months because the sellers didn’t want to admit reality is included in that number. If we could pull this statistic for only homes that went under contract in 7 days or less, there would likely be a huge shift upward in these numbers. Sadly, we’ve reached a limitation on the data the multiple listing service will let us pull or we’d show you!

Historical Data

We wanted to dial out our numbers to show what the last six years have looked like. We’ve been in a deep seller’s market the entire time (a.k.a. a market with less than five months of inventory) and the close-to-original-price ratio remained between 92% and 98% the entire time. Right around the start of the pandemic, the chart shows a drastic change. The most surprising takeaway is that homes priced over $1M, which typically offer buyers the most negotiating power, now happen to have the least!

How to Succeed

Like most savvy buyers, you’re probably already aware of the hot market strategies you can employ to help you successfully buy a home. They will work if you give yourself margin. This means you’ll need to leave room to escalate your offer price upward to beat out other buyers. Unfortunately, this also means you’ll need to consider looking at homes in a lower price range than your maximum budget. Developing the right “secret sauce” for your home purchase game plan is crucial to success. While the ratios we shared above reflect Denver as a whole, you’ll want to have your broker share more stats specific to the neighborhood you’re searching in. Or, you could wave the white flag of surrender and have your broker send this text to the listing agent of the house you’re trying to buy:

The choice is yours! 😂

Denver home prices reach an all time high

In case you missed it, the single family housing market is on 🔥 ! February’s numbers are in and the median sales price jumped 11% from January and almost 23% from February 2020’s benchmark. In fact, this month’s median sale price has set an all time high for Denver City and County. With interest rates hovering around all time lows and outpacing buyer demand, don’t expect to see the rising home prices reverse until inventory increases dramatically. Until then, we will be on the edge of our seats, feverishly watching!

Want more detailed information about the market in your neighborhood? Please reach out!

The Top Denver Neighborhoods of 2020

What a year 2020 was! With everything that happened in the world unrelated to real estate, you would have hoped we’d be seeing numbers that are kinder (a.k.a. less expensive) this year. One word to sum that up: nope!

The Most and Least Expensive Denver Neighborhoods

We’ve all heard how expensive Denver is becoming. When we look at the stats for the entire Front Range, counties like Boulder and Clear Creek tend to skew the numbers. Dialing into just Denver County, we see that the median sale price (MSP) went up 9.1% in 2020, but some neighborhoods have seen an even higher increase. So, to answer the burning question, is Denver becoming unaffordable? I’ll let you decide…

  • The most affordable neighborhood (bottom of the list) rose 18.3% from 2019, to an MSP of $210,000.
  • Over 51% of Denver’s neighborhoods have an MSP greater than $500,000 (up from 45% of neighborhoods in 2019).
  • Only 43% of Denver’s neighborhoods are in the $250k-$500k range (down from 50% in 2019).
  • Just 3.8% of neighborhoods have an MSP of less than $250,000 (unchanged from 2019).

See Full List

Denver Neighborhoods that Appreciated the Most + Least in the Last Year

We ranked Denver’s hottest up-and-coming neighborhoods using historical price growth data. A newcomer to our MSP growth list in 2020 was Hilltop, at 28.9% above Denver’s county’s already high appreciation of 9.1% (total appreciation of 38.0%!). Hilltop’s appreciation was driven by its larger lots and high amount of home renovations and new construction compared to its peer neighborhoods. The word is also getting out about Clayton, which boosted its neighborhood appreciation by 25.6% (approximately $100k of appreciation).

On the flip side, Union Station was hit hard by the pandemic as large-building living became less popular and an influx of new listings hit the market. Other traditionally hot neighborhoods saw a cool-off as well, which was welcomed by buyers searching in those neighborhoods.

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How to win in Denver’s home bidding war

I’ve been saying it since the first week of January… “It’s like someone flipped a switch and turbo charged this market!” If you aren’t on the hunt for a new home, let me be the first to tell you it’s a crazy, crazy, crazy market with the sellers in complete control. I took a quick peek at the multiple listing service statistics today, and here’s what I found:

There’s nothing to buy.

In Denver County as of February 11th, 2021, there are 895 active listings for sale and 1,831 listings that are pending (under contract). In January, there were 889 property sales. That leaves us with one month of available inventory, one month! I’m concerned for February’s stats after seeing that massive pending number. For buyers looking for properties under $1 million, it’s a very frustrating time. There isn’t much to look at. 895 homes is 0.003% of the 338,341 total homes in Denver, per the US Census as of July 1, 2019.

The competition is stiff.

Buyers are showing their resolve to succeed in this market. I was recently involved in two separate negotiations that came in over list price; one ended up $50k over list price, the other $130k. Each negotiation had over 15 offers, and not one was at or under list price. In fact, January’s single-family close-to-list price ratio was 101.3%, so my experiences were not the exception, but the rule these days. While the reality of the market may seem disheartening, let’s take a turn and break down how you can succeed in it.

Competing requires strategy.

I’ve seen some very aggressive offers in the last 30 days. Below are some of the popular tools used to get your offer accepted, though it’s by no means a comprehensive list.

  • An aggressive initial offer.
  • An escalation clause.
  • Purchasing the home “as is” and limiting inspection asks to a low dollar amount ($1-5k).
  • Appraisal protection (gap) clauses that waive the buyer’s right to object if the appraisal doesn’t come in at the above list contract price.
  • Buyer paying seller’s closing costs.
  • Higher earnest money deposits with a portion of or all of it non-refundable.
  • Shorter close periods (2-3 weeks for financed purchases).
  • Free seller lease backs after closing to allow the seller to find a replacement home (good luck).
Buyers need a Plan B.

If you find yourself on the losing end of things, don’t give up! Backup offers are becoming competitive — I just experienced my first multiple offer backup negotiation (no joke). It used to be a slam dunk to get a backup offer accepted after the home is pending, but not anymore! Have your backup prepared and submitted as soon as you receive the bad news. Being quick to the punch when everyone else is sulking could make the difference.

Backup contracts are free insurance policies that don’t prevent you from submitting other offers on new homes that you find. In the event that the primary contract terminates (which they do), you automatically become the first contract with zero negotiations. If you find another home you like while you’re in the backup position (and can get it under contract), a simple email terminates the backup contract, and voila! The best part? No earnest money is required for backup contracts!

It’s easy to get discouraged in this market, and I understand the urge to just take the “blue pill” and sign a lease to ease the endless anxiety and disappointment. But I would encourage you to take the “red pill” and work the plan that you and your real estate broker created. The end result will be worth it. Stay the course!

2020 Denver Real Estate Market Recap

What a year — and that’s just in reference to the Denver real estate market!

Imagine you were flying at 45,000 feet, staring down at a hurricane, with its eye directly over downtown Denver and winds stretching across the Front Range. I know this sounds like a strange analogy for real estate (especially since we don’t have hurricanes in Denver), but bear with me since I majored in aeronautical science and minored in meteorology (think, former professional pilot and weather nerd, turned real estate pro). Back to the hurricane… the wind represents the fast-paced, single-family home market where homes have been selling in days (sometimes hours), prices are skyrocketing, and buyers are frustrated. Then, look over to downtown Denver — where the condo market isn’t fast and furious. Just like the eye of a hurricane, it’s relatively calm and clear. Those who’ve been following the condo market in downtown Denver can understand — it’s been very slow and experienced a price correction in the pandemic.

Alright, enough analogies. On to the stats!

Days on the Market

We started 202o off strong, in the 40-45 average days on market (DOM) range. Then, well… you know. After the pandemic started gaining momentum, inventory started to shrink and buyers that were committed to buying saw it through. The buying frenzy that followed pushed the average DOM down to the mid-twenties for the remainder of the summer, and into the fall.

Inventory

The initial decline of inventory that started in January leveled off, then inventory began to jump in mid-late March when the stay-at-home orders hit.

In fact, it peaked all the way up to 3 months, a level we haven’t really seen since 2013! What was interesting to watch (statistically) in the midst of the media’s doom and gloom, was what happened as-stay-at home orders began to ease. As soon as Governor Polis deemed the real estate transaction an essential service, inventory began to plummet, eventually dipping lower than one by year-end. Yes, less than one month of inventory!

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