THE FRUSTRATED BUYERS CLUB

Search #1.  Wheat Ridge, Arvada.  Three or more beds, under $300k.  Fifteen homes on the market, 86 under contract.

Search #2.  Lakewood, Littleton.  Three or more beds, under $300k.  Twenty eight homes on the market, 95 under contract.

Are you kidding me?

Since buyers currently outnumber sellers by a ridiculous margin in the Denver market, many agents are enrolling an increasing number of their clients in what we affectionately call “The Frustrated Buyers Club.”

The FBC is a clearinghouse for all those innocent, well-meaning souls who thought it would be fun to buy a home in 2014, only to find that the experience quickly becomes a frustrating, time-consumptive, soul-crushing endeavor that leaves aspiring buyers in the throes of despair and agents on the verge of considering a Thelma and Louise style departure from the real estate business.

Consider the following… as of March 10, in the Denver metro area there are currently 1,225 homes for sale below $250,000… and 3,621 under contract.  That means 74.7% of entry-level homes listed for sale, regardless of price, condition or location, are under contract. 

Between $250,000 and $400,000… there are 1,568 homes for sale and 2,465 under contract.  That’s "only" 61% of the listed homes under contract, which would be fine, except that in a "normal" market that ratio would be more like 33%.

A "normal" market means five months of inventory with 2-3% appreciation. What we have right now has absolutely no connection to a "normal" market.  This is an overheating, inventory-starved market where Foreclosure 1.0 buyers, investors, relocating white-collar professionals, first-time buyers, oil and gas workers, marijuana growers and fed-up renters are storming the gates looking for inventory that simply isn't there.

Inventory remains within a few hundred homes of an all-time low, and by all-time low, I’m talking about records dating to 1985… when the population in Denver was about one-third of what it is today.

Since the end of December, absorption rates have plunged to unheard of lows as buyers have flooded the market, only to find absolutely no one wanting to sell.  In fact, about the only sources of inventory are builders, flippers and estates. 

Check out this transition at different price points in terms of absorption rates since the beginning of the year, keeping in mind that a “normal” market would have about five months of inventory:

0-$250k:  Absorption rate has fallen from 1.35 months to 0.61 months;

$250-$400k:  Absorption rate has fallen from 2.40 months to 1.01 months;

$400-$600k:  Absorption rate has fallen from 4.04 months to 2.45 months;

$600k-$1 million:  Absorption rate has fallen from 7.47 months to 4.27 months;

Above $1 million:  Absorption rate has fallen from 20.89 months to 7.62 months.

A falling absorption rate means more buyers than sellers entering the market, plain and simple.

If you are a buyer, here’s what you need to know if you plan to buy a home below $400,000 in 2014. 

* You need to do it now.  Waiting is costing you money as values continue to rise.

* You need to let go of your obsession about price.  With this imbalance between buyers and sellers, sellers control the market.  

* You need to do it before rates up further.  Again, higher rates are costing you money and will continue to cost you money on a monthly basis for the life of your loan.

Remember, the Frustrated Buyers Club is not a place you want to be.  It’s a place you end up.  And the only way to get out of it is to suck it up, get serious and commit to winning when you find a home that suits your needs.