Monday, February 22, 2016


Roll up to any new listing in the Denver metro area under $400k on a Saturday afternoon right now and you’ll see the logjam down the street.  SUV’s, Priuses, bicycles, foot traffic.  It’s almost comical to watch what’s going on as buyers fight over scant inventory, once again, just as happened in 2013… 2014… 2015… and now to start the year in 2016.

I closed a transaction last week with an offer $16,000 over list price, and I’ve routinely been writing offers $10,000 to $20,000 over list price for attractive listings since mid-December. 

The inventory today is down 43% from September, and the overall absorption rate marketwide is just 1.07 months.  For homes below $400,000, the absorption rate is 0.48 months.  A balanced market has five months of inventory.

While homeowners are getting rich, there’s desperation for everyone else. 

Without any exaggeration, the value of a median-priced home in Denver has been going up $60 - $70 per day, every day, for four solid years.  Nearly $20 million per day in new equity is being created in the city of Denver alone… but every penny of it is reserved for the ownership class.

If you are renting, the hole you are in gets deeper every day. 

This is that rare time when values and rents are moving in tandem, two locomotives leaving the station together.  Those living in rentals are getting clobbered on rent and seeing their ability to buy shrink almost by the hour. It's not a question of too many renters or too many buyers.  It's a systemic lack of inventory, period.  

There’s so much cash in Denver, so much equity being converted into liquid funds through HELOC loans, so much marijuana money that nobody really can quantify… that serious buyers are showing up with massive down payments or full cash offers that just blow smaller down payment buyers out the door.

The marijuana question is an interesting one. 

I recently listed an entry-level property which predictably drew multiple offers.  One of the offers was all cash, and as it turned out, some title research revealed that this buyer had purchased over 150 homes with cash in the metro area in just the past three years.  Total value of that real estate – between $40 and $45 million.

Want to guess where that money was coming from?

We’ve got businesses moving here from all over the country.  In a very interesting twist, Zillow (which currently has no data-sharing agreement with the Denver MLS) has moved 330 employees to a location directly adjacent to the Centennial airport (so high ranking executives can easily fly in and out, and perhaps play a round of golf at Inverness) with plans to hire another 150 more in 2016. 

Why would Zillow make Denver its second largest hub in the US, when it is currently in a nasty stalemate with the leadership of the Denver MLS over its abuses of past data sharing agreements and its refusal to accept responsibility for the accuracy of its own data?

It’s pretty simple.  While the dispute with the Denver MLS is temporary, the demographic that is migrating here and changing the face of Colorado is not.  Zillow is recognized as a leading technology company with aspirations of dominating the real estate information market… so making a huge bet on Denver makes perfect sense.

As I wrote about last month, the gentrification of Denver is underway, but at a scope and level few people truly understand.  It’s not just the poor neighborhoods of Denver that are being cleaned out… soon, it may well be what formerly constituted Denver’s middle class. 

I spent 38 years in the most populated areas of California, and what eventually came to be was a world where 90% of the people who bought their homes a decade ago couldn’t possibly afford them today. 

Is that happening in Denver today?  Increasingly, it appears so.

Eventually, you end up with constrained inventory because no one can afford to sell and move up.  So people stay.  Inventory dwindles.  Prices go up further because there’s nothing for sale. 

Like it or not, Denver is becoming a very big city.  With very expensive housing. 

For those in the market today, finding a “dream home” may already be just a dream. 

If you plan to stay here, the best advice I can offer is to find something, anything, and get it into your name as fast as you can. 

The buyer pool is so deep, and inventory is already so constrained, that the script for further price appreciation in 2016 has already been written.

We are not the Denver you grew up with, or the Denver of even a decade ago.

Thursday, February 4, 2016


Through much of my correspondence over the past few weeks, I’ve said one thing over and over… pay attention to the first 90 days of 2016, because it will set the tone for what kind of year we are going to have in the Denver housing market.

Thirty four days into the year, the verdict is already in… it’s going to be another year of straight fire in red hot Denver.

January blew up, both anecdotally and by the numbers, with buyers rushing into the market and virtually anything worth even considering going under contract with multiple offers, usually well over list price.

I have spent much of the past month standing in line, often two and three parties deep, waiting to get into new listings the first day they hit the market.  I have watched new listings hit my phone in real time, only to get another text message hours later showing that same home under contract.

In these types of situations, the numbers should be your guide.   So here’s some evidence:

As of this morning, there are 4,932 homes on the market in the Denver MLS.  That’s down 9% from December (I thought more listings were supposed to show up in January), down 24% from November, and 37% lower than the 7,823 homes that were for sale in October.

While there are 4,932 homes for sale, there are 6,475 under contract… a ridiculous active-to-under contract ratio of 0.76.  To provide some context, a “normal” market has about twice as many homes for sale as you would see under contract.  In that “normal” environment, it would take 45 to 60 days to sell your home and values would be going up 2-3% per year. 

For things to be “normal”, you would need nearly 13,000 homes on the market… and there are 4,932.  That means inventory could increase by 250%, without one additional buyer coming into the market, and you would still see values moving higher.

At this point, you can’t really worry about 2013, 2014 or 2015.  Great years for values, historic times in terms of equity growth for Denver housing.  But the numbers that matter today are the numbers in front of us. 

We currently have an absorption rate of 1.07 months, meaning at the current pace of sales, every home in the Denver MLS would be sold in 1.07 months if no new inventory was to come online.  The numbers are even crazier at the lower price points.

If you look at all inventory below $400,000, the absorption rate is 0.48 months, or roughly two weeks.  Economists consider five months of inventory to be a balanced market.  Put another way, a balanced market has about 150 days of inventory.  In Denver, below $400,000… we have 14 days of inventory.

What this means is prices are going up, period. 

In Littleton, if you look at all homes between $300,000 and $400,000, you see this morning that 121 out of 136 total listings are under contract. That is 89% of the inventory, regardless of price, condition or location!

I spent much of last year scanning the horizon for black clouds that never formed.  Yes, we are in our fifth year of a sustained run on housing, and rarely do these runs last more than about seven years.  But the numbers must be your guide, and what the numbers say is that this market still has upside, still has fuel, and is struggling mightily to accommodate the 270 people who are moving to Colorado each day. 

If you’re looking to buy into this frenzy, know that you’re going to have to be fearless.  You’re going to have to swing hard and likely pay more than you planned.  You’re going to have to climb over the top of a bunch of other people all chasing after the same thing. 

But the sooner you get it done, the sooner you accrue the benefits. 

This is the hottest housing market in America, period.  If you’re not up for the fight, don’t bother stepping into the ring.