The story remains the same: no inventory!
When I say “no inventory,” I mean that we are consuming homes as fast as the market is producing them (1,429 new listings vs. 1,416 sold units in August). We typically see a reduction in active listings around mid to late fall but not during the summer months. Active listings for August were nearly as low as what we saw this past May. Buyers who were searching back in May suffered through several offer rejections before they were able to get under contract.
It’s not all doom and gloom though! 30-year mortgage rates continue to decrease, homes are taking a few extra days to sell, and the median price dipped slightly from June’s highs.
Pro-tip to buyers: keep your guard up, and treat every new listing like one that will be gone on Monday. Rely on your broker’s offer recommendations and don’t forget the competitive market clauses as a free insurance policy in the event that the home you are submitting an offer on is “the one.”
Want more detailed information about the market in your neighborhood? Please reach out!
The current catchphrase in Denver’s real estate market is “market shift.” While my day-to-day observations agree with that, the statistics aren’t necessarily reflecting a shift!
Denver’s median sale price dropped $10k to $650,000 since June, which could indicate the start of a slowdown or it could be an early seasonal cool-off driven by a super-hot spring and early summer sell-off. Inventory remained unchanged from June, but days spent on the market dipped to 13 — the lowest it’s been since we began tracking it in 2007! One thing to point out is the majority of July’s closings are from contracts that were signed in June, and June was still a super-hot month. August’s numbers should be interesting and we’ll definitely be chomping at the bit to analyze the data as soon as we can!
Want more detailed information about the market in your neighborhood? Please reach out!
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!
Along with every other real estate professional in Denver, for years we’ve been saying, “it’s a seller’s market,” “homes are going quickly,” so on and so on. But what does that really mean for a buyer? How do you navigate the current market, let alone the roller coaster of emotions throughout the buying process? Let’s walk through it.
It’s important to understand the current market you’re about to throw yourself into. You’ve probably heard home buying stories from co-workers, family, or friends advising on how difficult it is to purchase a home these days. While there’s certainly truth to their experiences, there also tends to be exaggeration (we all want to tell a good story, right?). The best place to start for an unbiased opinion of the market is with statistics. It may not be one of the most exciting parts of buying a home, but it’s one of the most important. It will help you understand the reality of what’s happening in the market, and more importantly, what’s driving it. You don’t need to spend hours doing research, you just need the 30,000 foot view so that you can begin to formulate accurate expectations for your upcoming journey. Luckily, we’ve made that easy for you. Skip the endless Google searches and read our 2020 real estate recap. Before you know it, you’ll be up to speed with the current market. It will be painless, I promise!
It’s important to have an organized plan before you start your search (yes, even your online search). Once you’ve educated yourself on the market, the next step is to make a game plan. Start putting together your advisory team, which consists of a knowledgeable real estate broker and lending partner. These professionals will help to facilitate your planning in each of their prospective areas. A few things to consider while planning:
- Time frame for purchasing
- When to start the search
- Type of financing that is best for you
- Down payment source and amount
- Type of home (condo, townhome, single family, etc.)
- Neighborhood statistics (zoom in from the 30,000 foot view!)
This list is just a starting point. Everyone’s planning will look somewhat different based on their home buying goals. The great thing about hiring a team? You don’t need to reinvent the wheel. They’ll coach you through the process to make sure you’re making the best possible decision for you and your family.
This is the fun part. Once your plan is complete, it’s time to work your plan. In our current market, time is of the essence for touring homes. Traditional pre-pandemic home touring consisted of clustering several homes and viewing them back-to-back in a short time period. Usually, there are other overlapping groups touring the same home you’re looking at. Today, overlapping showings are a no-no, and bookings to view hot listings in desirable neighborhoods fill up fast. It can occasionally take one or two days for a tour slot to become available (picture anxious buyers hitting refresh over and over again). The moral of the story: When a home catches your eye, schedule a tour with your broker. Whether that’s in-person, via FaceTime, a recorded video, or on Zoom, it doesn’t matter. Just get your eyeballs on it so you have the opportunity to compete.
Submitting an Offer (or two, or three)
Now the planning pays off (hopefully). With Denver’s low inventory, you’ll likely be in competition with other buyers for a home. Emotions get high, and anxiety can creep in. Don’t worry. This is normal. The greatest advice I can give you is to trust your broker regarding the value of the home you’re interested in and listen to their negotiating strategy. Remember that they’re on your team, and together, you’ve already outlined the desired outcome in your planning session. I like to call the plan a “guard rail.” It’s outlined before all the craziness begins, and it’s there to keep a buyer from making an emotionally-based, often poor decision. Don’t let the plan fly out the window when things get stressful!
We are in a deep seller’s market, consisting of multiple offers. There can only be one winner per home, and while hopefully that winner is you, be mentally be prepared to walk away when things go awry. Stick to your plan. Listen to your broker’s advice on a recommended maximum price for the homes you are offering on, and you’ll be fine. Your solace in losing will be knowing that someone else overpaid!
Buying a home can be an emotional roller coaster.The process is filled with hope, anxiety, stress, disappointment, frustration, and eventually joy. To help manage these emotions, set expectations, plan properly, and seek counsel from your real estate broker. These guard rails should soften the blows. Remember that your broker has their head in the game every day, and their years of knowledge can be trusted. Their council, along with your perseverance, will get those keys into your hands in no time.
Source: Kelcey McClung of 5280
Coming off, yet another, bidding war this past week (oh, Hilltop), the numbers don’t lie! Inventory remains low, demand has picked up over the winter due to low interest rates, and prices keep inching higher. If you’re looking to purchase a new home in 2020, we recommend doing it in the first quarter. The summer is shaping up to be another brutal one for buyers!