The Denver market is transitioning. You can see it in the numbers.
For only the second time in the past 68 months, inventory actually increased on a year-over-year basis over the past 30 days. Yes, you read that right… for 66 of the prior 68 months, year-over-year inventory has fallen. So this is a noteworthy development, for sure.
As I have said before, interpreting these numbers requires some context. Denver is still the #3 ranked housing market in the country, according to Zillow, and second according to Case-Shiller. We are healthier than 90% of the markets in the US, and with an unemployment rate of less than 4% in Denver, the Rocky Mountain region remains an economic powerhouse.
We have become the “go to” market for Millennials (thank you California) and companies have come flocking to Colorado for its comparative low-cost, low-regulation business environment.
Home values in Denver have appreciated by a mind-blowing $18 million per day since the beginning of 2012, with the average home going up in value by $76,000.
The news has been so good for the so long that many people have come to accept these conditions as the “new normal”. Except that would be flawed thinking.
A closer look shows that our magical four-year run in housing is starting to wind down. Just take a look at the numbers:
The current inventory of homes for sale – 8,747 – has essentially doubled since the January low of 4,420. Last year, by comparison, inventory rose only 37% between January and October.
For homes priced below $250,000, the absorption rate has doubled since June… from 0.33 months of inventory (unprecedented demand) to 0.69 months (still very healthy, but not the same).
Absorption rates have also doubled in the $250k - $400k range, from 0.48 months in May to 1.01 months today. In fact, absorption rates are up at least 70% in all price points since the spring, meaning it is taking about twice as long to sell a home now as it did in our epic, crazy, frenzied spring market.
Because the headlines always trail what’s happening on the street by several weeks, most people are not aware of how conditions have changed in the last 60 to 90 days. But changing they are.
I have seen it with my own listings… fewer showings, fewer offers and (generally speaking) less qualified buyers. The buyer pool is thinning, and what drove double digit appreciation was demand. As that demand calms down, so will prices.
For the first time in two years, I recently accepted an offer with FHA financing, down payment assistance and the seller contributing money toward closing costs. That doesn’t happen in a red-hot market.
For the most part, the days of selling your home in a weekend with multiple offers are over. The days of giving buyers 96 hours to submit offers – “highest and best due by 5 p.m. Tuesday” – are over.
We’re headed back to traditional real estate, where (gasp!) it might actually take a few weeks to sell your home, and where (double gasp!) you might actually have to negotiate with your buyer to close the deal.
Agents who can’t articulate this information to their sellers are going to continue to overprice their listings, and buyers will continue to look but not swing. Listings will sit longer, grow stale, and languish on the market. 2016 is shaping up to be a solid year for alcohol sales in the real estate industry.
There are still buyers out there, and there are still reasons to buy. Rates remain a gift from the Fed. Owning is still cheaper than renting in most parts of town. But the days of double-digit offers, buyers waiving appraisal clauses and taking homes “as is” are mostly over.
At these prices, buyers want quality and value.
If you are selling, you need to get in front of this. The market has been one-sided for so long, we’ve forgotten what normal looks like. For too long, it’s been too easy.