The pace is being set for the year. We have more homes on the market than last year. We have more buyers buying homes than last year. Home values are still going up. The number of days to sell a home is going back down. The number of multiple offers is going up. The number of “flash” sales (properties sold in less than a week) are going back up. If you’re a buyer in this market, you probably don’t feel like it’s a whole lot easier than what you heard about a year ago! If anything, it’s harder because home values are up more than 8% from a year ago!
Affordability is still the driving force behind most nay-sayers regarding our market. They’re saying “Prices can’t stay this high!” History disagrees. Historically, as affordability goes down, prices tend to flatten but not drop dramatically. That’s not what caused the 2008-2012 recession. It wasn’t because homes weren’t affordable. It was because of poor lending practices. All the indicators show a strong market here in Denver with a solid financial base.
Affordability IS what will slow down our market. More and more buyers are needing to maximize their budgets to qualify for anything that fits their basic housing needs. This makes lending more difficult and it takes longer. Lending regulations are still tight and, we’re setting the stage for a few more short-sales and foreclosures in the future as our rate of appreciation eventually slows down.
Last year we saw the peak in activity happen in late May and early June with the market cooling off a bit earlier than the usual July/August. We went higher, faster, sooner and cooled sooner. Signs indicate that this will happen again this year. For sellers, you’ll want to close before we start cooling. If you’re trying to time the market, the latest you want to get your home listed will probably be April/May or you’ll miss the peak.
I’m still expecting almost double-digit appreciation again in 2019. Waiting to buy isn’t saving you any money. And with threats of interest rates heading upward again, that’s just going to drive more buyers into the market and cause prices to drive higher than previously expected. So, as we continue to be in a seller’s market, the time to make your move is now.
Share your real estate goals with us and we’ll be sure to help you hit them! Based on your goals, we’ll get you on the right plan that will make you happy to have a friend in the real estate business.
So let’s get to the local numbers.
Real estate is local. What’s happening nationally doesn’t determine what is happening here in Denver, CO. Just like you wouldn’t get your weather from a meteorologist in Florida, you shouldn’t get your real estate updates from national resources. So while the national news does a fine job of giving us an overview of the market across the country, it doesn’t tell us what’s happening in the Denver real estate market. I take the local numbers and break them down to help anyone understand the driving forces in our market. Below are the graphs and numbers along with my breakdown of what’s happening in today’s Denver market.
Denver home values are strong!! You can see the slight leveling ofhome prices, but we’re still up over 7% from last year. Since this is based on prices that were negotiated in January, this is a lagging indicator of our market and I don’t give it much weight. So, at $515,117 in Denver and $462,192 in our MLS, we’re still an expensive city to buy in. We expect the Average Sold price to continue increasing through March and into April/May. This makes now a great time to move up into something bigger!
For new listings hitting Denver’s market in February, we see that we’re up more than 12% over February last year with 1,320 new listings hitting the market in Denver and 6,275 new listings in the entire MLS! We’ll see these numbers continue to move up over the coming months, but I’m expecting our total active listings to actually go down in future months as buyers outpace the new listings coming to the market. This is one side of the coin that drives our appreciation for 2019.
In the same month we saw 1,320 new listings come to the Denver market, we put 1,224 listings under contract. So our buyers are basically keeping up with the new listings. We’ll keep watching these numbers and I anticipate the buyers outpacing the new listings next month. Across the entire MLS, also had similar buyers vs new listings.
So, with buyers and sellers staying at the same pace last month, our active listings are also staying at about the same count. In Denver County, we’re at 1,636, only 28 more listings than last month but 18.2% more than last year. In the whole MLS we’re at 9,761 which is 196 more than last month (up 2%) and 22.6% over last year. Remember, this includes both condos and detached single family homes as well. So, the majority of our increased inventory over last year is due to the updated Construction Defect Laws that were passed and as well as the expansion of our MLS. Either way, we’re still sitting in an extreme seller’s market.
So, here’s the quick number to watch – “Months Supply of Homes” or it also works to be called “Homes per Buyer”. In a balanced market, we’ll see 6 months of inventory or 6 homes per buyer. This gives enough selection for buyers that home values tend to stay flat. Currently, we have 1.5 homes per buyer to choose from. And if no new homes come on the market, then we’ll run out of houses to sell in 45 days. So, call me to start selling your homes!!!
While this may be the highest months of supply we’ve seen since July of 2014, you can see we’re still in an extreme Seller’s market. As our supply continues to stay at less than 6 months, we’ll continue to have upward pressure on prices. If you’re waiting for homes values to start dropping, we’d need more than 21,000 more homes to suddenly appear in our MLS or more than TRIPLE the number of homes in our market! OR we could also suddenly lose 2/3 of our buyers. With Denver continuing to attract companies and as more people find out the greatness that is Colorado, there is no signs of buyers going away. It’s just too amazing for people to suddenly stop buying here – even as we become more crowded and if interest rates rise! Reminder, we haven’t seen a 6 month supply of homes in Denver since June of 2011.
With low inventory, we get low days on market. Our average days on market is still sitting around 30 days which is very low compared to January 2011 where we were at 111 days. And we’ve seen relatively no change in that over the last two years. As buyers have more selection to choose from, overpriced homes will sit on the market longer and we’ll see this average move on up. It is crucial that you hire a professional like us to ensure you’re pricing your home right from the start! This number will likely go down in the coming months. This also makes NOW the best time to buy, even if you have something to sell or even if you’re “stuck” in a lease. You’re likely to save more on your purchase today than the few bucks you might get by waiting until Spring. If we act quickly, we’ll still be able to beat the other buyers to the market and get you a great deal. But that’s not going to last long.
So, what’s the bottom line?
Our market is strong. Home values are following the seasonal trend of moving back up and this will continue into March and April. Limited inventory will continue to drive up our prices. We’ll slow down eventually, but it’s not likely to be this year.
What will drive an inevitable slow-down? Interest rates going up will make purchasing a home even more expensive in Denver. As home values continue to rise and wages stagnate, home affordability will continue its downward trend meaning fewer buyers can afford to be in the Denver market.
Job growth is bringing well-paid professionals to Denver who can afford our city. We get lots of buyers from California and New York who think our prices are a steal!! Everyone from Texas thinks our property taxes are amazing! We still have too few homes available for the buyers wanting to buy. Meaning, we will continue to set new records for our average sales price. So, until people leave Denver or we build significantly more housing, we will continue to stay in a seller’s market. As the market adjusts, Urban Pro Homes will be watching to ensure our clients get the best!
Here are some of the key points:
Our total active properties remain very low. We’re at less than a quarter of what they need to be for a balanced market. While we’re seeing total inventory go up over last year (+22.6%), we are also seeing demand going up (+9.2). That’s not the whole story. If you break out Detached homes from Attached (condos, townhomes, etc), you’ll find Detached properties only up 7.9% from the same month one year ago and Attached properties up 33%! For both, units under contract are up around 9%. Attached properties are skewing the numbers a bit!
Why are there so many Attached properties compared to last year? The resolution of Builder Defect Laws allowing for new attached properties to finally get started 18-24 months ago is now hitting our market as those units get completed. This increased inventory is softening our sales in the condo world, but it’s not shifting the market completely in the buyers’ favor. Instead, it’s just a “slightly less good seller’s market”.
We’ve moved from around 1 month of inventory last year to 1.5 months of inventory.
Average Days On Market (DOM) were down to 42 days to go under contract, or 17 median days to contract. Both are following previous year trends.
Average sold price went up from January and is up year over year. Median sold price was either flat or slightly lower and will likely bounce back up in March. Remember, since it typically takes 30 days to close, these prices were negotiated in January making this a trailing indicator.
We’re into the compression phase of the year meaning home values will only be going up for the next few months. Waiting to buy is costing you money. As a seller, be careful if you’re trying to time the market so you don’t miss the seasonal peak and accidentally hit the market overpriced.
Looking at ALL the numbers shows that this will likely be another strong year of appreciation with very little signs of slowing down.*
*If you’re thinking about a condo, either to buy or sell we should talk specifics.
Your Real Estate Consultant
REALTOR®, BOLD, EcoBroker, CNE, CHRE, ILHM, KW Luxury
Professional Denver Real Estate for the Urban at Heart