Amazing. Incredible. Astonishing.
Those are just a few of the words that come to mind when describing what happened in the Denver real estate market during January. The surge in activity - the overall absorption rate fell from 3.32 months to 1.81 months in just 30 days - rivals anything I have seen in 19 years as a real estate broker.
Some of the ratios are just absurd. In a "normal" market, with six months of inventory, you would see about twice as many homes on the market as you have under contract at any point in time. As of today, below $250,000, there are currently 3,475 homes under contract. That means, under "normal" market conditions, you would have 6,950 homes for sale. The actual number - 1,843.
Want more numbers?
In February of 2011, there were 18,000 homes on the market and 4,400 under contract.
In February of 2012, there were 10,000 homes on the market and 6,000 under contract.
Today, there are 7,000 homes on the market and 7,200 under contract.
In numerous conversations and Facebook posts over the past few months, I have shared my view that half of the so-called "buyers" in the market today will never buy a home. I equate it to 2007, when (literally) 50% of the sellers who listed homes for sale never sold them, because they could not come to grips with a changing market (i.e. a declining market) and they could not let go of their overpriced appraisals from 2005.
Today, countless "buyers", often taking counsel from out-of-state relatives while obsessing on three-year old sales data appearing on the Zillow app, look at me with confused eyes and stubbornly proclaim they "simply will not pay these prices" for homes.
Ok, see ya later.
Those who work with me know I am an educator first, and a salesperson second. They also know I take the ethics of this business very seriously, that I own my fiduciary responsibility to take care of my clients, and that I am fully committed to a long and enduring "happily ever after".
Having said that, this is a Denver real estate market that is surging like none other in the past 20 years.
Construction vaporized for four years in this state, the population grew by 400,000 during that time, every unqualified homeowner (and neighbor) was uprooted and forced out by foreclosure, and default rates in Colorado are now 40% to 50% below where they have historically been in normal markets because underwriting has become so obsessively tight.
And, in a highly under-reported development, some percentage of the 70,000 Denver metro area households foreclosed on in 2006, 2007 and 2008 will be re-entering the housing market in the next two years. What do you think that will do to demand?
What we have today are neighborhoods full of qualified buyers who made real down payments with loans offering obscenely low payments who are better educated than their predecessors and who understand the value (and responsibilities) of home ownership.
Does that sound like a crash waiting to happen?
I don't think it does. I think we're on the front end of what will be an extended run for property values in Colorado. At least until the builders catch up with demand and, perhaps, overbuild once again. But that's at least a few years off.
Nothing lasts forever. Conditions will change. Eventually.
But for the foreseeable future, home prices in the Denver metro area are going nowhere but up.
