We have a few items to look at which should further indicate a trend I’ve been hinting at in the last few updates as to the state of the Denver Real Estate market. In January of this year we saw active listings for sale at 5,577 homes, which represented a 44% increase over January of 2018. In April of this year we saw active listings for sale at 6,292 homes, which represented a 35% increase over April of 2018. As of July, active listings are sitting at 9,520 representing at 28% increase over July of 2018. In fact, we have to go all the way back to July of 2013 (6 years) before the last time we saw this many homes active in the marketplace. This clearly demonstrates that the housing market is starting to soften from what we have experienced in the boom years between 2013 to 2017. I can also verify that on many recent listing appointments with potential sellers, I review the activity index and absorption rates for the immediate areas and activity has been dropping and absorption rates have been ticking up which dictates the number of months of supply in the marketplace.
The hot area for buyers still remains with properties priced at $400k or less, which only represents 21% of the active listings in the Denver market. Once you get above $500k in home price we are seeing properties sit much longer and larger price reductions taking place. Having your home ready to sell and move-in ready will go a longs ways in helping you to get your home sold in a timely manner, so it’s important that you have good guidance from someone like me to help you get your home ready along with maintaining realistic expectations for what it will take to get your home sold.
Here are also some other interesting tidbits of information worth looking at from the recent DMAR newsletter:
- The average number of listings at the end of June historically (1985-2018) sits at 16,577 homes, so we are still way below historical norms for a more traditional market that is in equilibrium. The highest number of listings was in 2006 which sat at 31,900 homes for sale, and the low was in 2015 which bottomed out at 6,197 homes for sale.
- July is historically a slow month for real estate transactions and typically represents the summer peak with active listings for sale as people are in full swing with family vacations and traveling. As we head into August, we should see the seasonal uptick in activity with home sales until we get into late October.
- The 30 year interest rate on a mortgage is back down to around 4%, which we were sitting at around 5% back in December 2018. The decision by the Fed to not raise rates going into this year has certainly made a big impact on this and the stock market rallying back from December lows also goes hand in hand with this current rate environment. Many people were expecting interest rates to continue to rise, so this has certainly helped in the short run with buyers finding affordable mortgages.
- Price reductions are on the rise, especially with listings that have either had no showings or no offers within the first two weeks of being on the market. Pricing your home correctly from the start, having realistic expectations, and having your home ready to sell is so very critical in this environment. The times when you could just put anything on the market and have it sell instantly are over, and I’m going to elaborate more on this in the next segment.
What should we be taking away from this update? While higher inventory levels will help take some of the pressure off buyers and help level off the market especially in the higher end price range, we still have a competitive marketplace in the $400k and lower range. As the inventory levels continue to tick up, this should certainly have an impact on leveling out the marketplace going forward.