I hope you are doing well and having a great summer! Hard to believe Fall is right around the corner…
The market has changed some since our last communication back in March. As I am getting the same questions from many of you, I thought this would be a good time to get an update out there to help keep you in tune with what is happening in the Denver market.
For the first time in the last year or so, buyers are now competing with less competition and as a result the days of the extreme bidding wars have been drastically decreasing. Buyers are now getting more opportunities to get a home at asking price and even below asking price in some situations, but multiple offers are still out there depending on the situation. We are going to dive into some of those dynamics below and hopefully provide some good insight to help you or anyone you know who might be trying to decide whether now is a good time to sell and/or buy as we head into the Fall season.
Denver Metro Area Home Report: July
To be clear, we are still facing all-time lows with inventory levels even though the market has calmed down some from earlier this year and latter half of last year. Some of this has to do with the seasonality of the market where inventory levels typically bottom out in January and steadily increase and peak heading into June/July, then we have a push in the Fall where activity picks back up and inventory tends to tick back down. There is also some buyer fatigue baked into this as well, as the extreme bidding wars left many buyers feeling defeated after several attempts in writing competitive offers only to be outbid from stronger buyers in a healthier financial position that could afford to bid up the price. Actually, equilibrium is much better for the market as the pace over the last 12 months was unsustainable in many ways so I applaud the current situation. However, we are still facing a supply vs. demand environment so I still anticipate a solid fall season heading into the holidays.
Here are some real estate market facts from the latest DMAR newsletter and other sources:
- The all-time low for inventory levels in the Denver Real Estate market was set this year at 2,024 homes for sale. As of July of this year, we were sitting at 3,122 homes for sale and if we wind the clock back 12 months we were sitting at 6,383 homes for sale representing a 51% decrease year over year magnifying the inventory shortage situation. If we look at June of this year, we were sitting at 2,075 homes for sale which is barely up from the all-time lows set in February. The stat that really jumps out here is the inventory increase from June to July representing a 50% increase month over month, which also set a new record for the Denver market and signaling what I outlined above….things have cooled some with buyer activity but we are still well below norms with inventory.
- Interest rates have also ticked up slightly since my last writing, but overall we are still sitting at all-time lows with current rates which should still be bullish for buyers that are out there. The Federal Reserve has hinted at “tapering” the aggressive measures taken to keep interest rates low to help spur economic activity. Inflation has been popping up in some segments of the economy. This will need to be watched closely, but most people agree rate increases will not take place until 2022/2023. The fact that we have been operating in a low interest rate environment for well over a decade now makes me question how the public will react if or when we do move back to a more normalized interest rate environment.
- Colorado gained about 50,000 new residents between July of 2019 and July of 2020. Over the last decade we have added about 760,000 new residents, the majority of which coming from California followed by Texas, Florida, and Illinois. Until this net influx of people tapers off, the supply issue we are facing will continue. However, home affordability will hold some of this in check along with buyer fatigue as discussed earlier.
- Winners of bidding wars are starting to show signs of getting cold feet. In a recent article from the National Association of Realtors, 61.1% of buyers in the mountain region reported that buyers were looking for a way out of a deal after buyer’s remorse for potentially overpaying and backing out of deals. The Northeast region topped at 61.6% and the Pacific region came in at the lowest at 44.4%.
- Vacation home sales jumped 57 percent year over year in 2020 and the median home prices for vacation counties grew faster than the rest of the country. I know just from getting around the state people seem to be traveling in droves, which fits to some degree. However, we are also facing labor shortages just about anywhere you visit as well so the sooner we can get America back to work the better.
A couple things to note in closing:
- While there has been a fairly large run up in real estate prices over the last 12 months it is VERY important that if you decide to sell your house in the near future that you maintain realistic expectations and resist the urge to be overly aggressive in price as that could very well backfire. If it is priced right and you get into a multiple offer situation, let the buyer take on the risk of going over the asking price and writing an appraisal gap clause into their offer.
- I have had many people express an interest in selling their current home and either upgrading or downsizing into another home over the last few months, but there was some hesitation simply because the buying market was so competitive and there was a fear that a replacement home would be challenging to get. The current market conditions could present an opportunity to re-visit that scenario if that is still something of interest. As always reach out and we can discuss further as I’m here to help!