SEWER LINE BLUES

There's no such thing as a "perfect" sewer line.

For years in our robust and appreciating housing market, unless sewage was actively backing up into the basement, sellers had the ability to push back and shut down requests for sewer line repairs.

But with a softer market comes new realities, including more complex and difficult inspection negotiations.  Buyers today simply won't tolerate deficiencies they may have been willing to accept when competing with multiple offers during the "glory years".

Nowhere is this more evident than with sewer line inspections.  Nearly half of the deals I have closed this year have required negotiations and/or repairs related to sewer line concerns.

Why has this happened?  And how long will this continue to be an issue in the Denver housing market?

First, let's start with some history.

Up until the late 1980s, most sewer lines in the Denver metro area were traditionally 3 to 5 foot segments of clay pipe sleeved together with rubber joints.  This allowed for some ground movement (without shattering the pipe), but over time these lines can shift, roots can get into the line and eventually many of them fail.

Since the late 1980s, most sewer line installations have been continuous runs of plastic pipe.  This more sturdy plastic material can benf and adapt to some soil shifting, although "'bellies" can still form in the line and become an issue.

But as a generalization, you're going to find substantial imperfections in at least 50% of the old clay pipes and probably 20% of the newer plastic lines.

One major distinction here is that sewer line evaluations can be very subjective.  What "company A" says is a defect needing repair or replacement may be considered entirely functional by "company B".  And who scopes your line is also a really big deal.  Under most circumstances it is risky (at best) to hire companies to scope sewer lines that also do repairs, because the conflict of interest here is obvious. 

When it comes to repairs, now you have another variable.  There are certain predatory "big box" plumbing companies that will be happy to charge 3 - 5 times what smaller, more nimble repair companies will charge for the same repair.

Some companies will automatically default to replacing the entire line, which involves digging up the sidewalk and burrowing down 8 - 12 feet into the street.  We're talking $15k - $25k most of the time for this type of repair.

If a repair will do the trick and the crack or break is located in the yard (and not under the sidewalk or street)... you might be looking at $4k - $6k (or $15k if you hire a big box plumber).

I have looked at 1000+ sewer scopes through the years and I usually have a pretty good idea what's a legitimate concern and what is scaremongering.  I also know which companies you DO NOT want anywhere near your sewer line (unless you're comfortable signing over your house to them).

How long will sewer line issues be a major point of contention in home inspections?  For over a decade, our housing market was among the most robust in the nation and sellers simply said "no" to most repair requests.  As a result, not only do you have a higher number of older lines failing due to age, but you have a decade or more of "catching up" to do on repairs that should have been made (but were not) when homes sold between 2010 - 2022.

Add it all up, and it's just another challenge for sellers already trying to navigate a difficult market.  For buyers, it's okay to dig your heels in when circumstances call for it.  And whether you're buying or selling, it's critical to make sure you have an honest, reputable vendor running that camera through the line.

The "sewer line blues" will continue to be a thing until our market heats up again.  Reality is, almost every sewer line has some imperfections to it.  Lines with minor defects or hairline cracks can often continue worked well for decades, as long as they are maintained and monitored.  But sometimes the issues are more serious.

In our current market, buyers have tremendous leverage.  And that means a lot of yards (and streets) are being dug up these days for sewer line repairs.  

CURRENT INDUSTRY LAWSUITS: ZILLOW VS EVERYBODY (OR IS IT EVERYBODY VS ZILLOW?)

As the real estate world continues to adjust to harsh market conditions and frustrating new compensation rules, Zillow is under the microscope like never before. 

Here's a look at current industry lawsuits involving Zillow:

COMPASS VS ZILLOW:  Compass and Zillow are currently involved in multiple countersuits over each other's practices.  Zillow is suing Compass for access to its "Private Exclusive" platform, which promotes some Compass listings exclusively through the Compass website.  Compass is suing Zillow for withholding certain Compass listings from its platform in retaliation for its Private Exclusives Network.

HOMEBUYERS (CLASS ACTION) VS ZILLOW:  A class-action lawsuit filed in September by the same attorneys who upended real estate compensation practices in 2023.  This case alleges that Zillow deceptively inflates homebuyer costs by charging referral fees of up to 40% for leads generated through its various platforms.  The case seeks class-action status for anyone who used a Zillow-referred agent to purchase a home in the past four years.

CO-STAR VS ZILLOW:  Co-Star is the parent company of Apartments.com and Homes.com, and in this suit Co-Star claims that Zillow has effectively stolen more than 47,000 listing photos from its websites without compensation or permission.

FEDERAL TRADE COMMISSION VS ZILLOW:  The FTC has filed suit against Zillow for "unfair trade practices" based on a recent $100M marketing agreement between Zillow and Redfin which gives Zillow exclusive access to Redfin's network of rental listings.  This is all part of a larger "private networks" debate as industry players look to build exclusive channels with exclusive access to certain listings and property types.

Why so much Zillow chaos?

Zillow generates more than $2 billion in revenue each year by monetizing listing data it does not own.  Both nationally and locally, transaction counts are down dramatically as buyers are priced out by high rates and sellers simply stay in homes that no longer meet their needs because of 3% mortgages.

Housing has become an incredibly inefficient market thanks to the Fed's boneheaded zero-interest rate policies of 2020-22.

The pie is no longer big enough to feed all the mouths, and so Zillow has become a top target in a multi-front war with brokerages, consumers and the FTC as it tries to remain relevant in a rapidly recalibrating world. 

COMPASS TO ACQUIRE ANYWHERE, INC (AND WHY IT MIGHT BE BAD NEWS FOR ZILLOW)

Last week, Compass CEO Robert Reffkin announced that Compass has agreed in principle of acquire Anywhere, Inc., parent company of Coldwell Banker, Century 21 and Liv Sotheby's. 

If finalized next year, this mega-merger will greatly expand the nation's largest real estate brand, giving Compass direct control of more than one-quarter of the entire listing market. 

What does this mean for the real estate industry?  And more importantly, what will it mean for consumers?

Ever since the historic Sitzer-Burnett lawsuit settlement upended 100 years of precedent in terms of how real estate compensation is paid in October 2023, the real estate industry has been awash in consolidation, conflict and litigation.

With cooperation (i.e. "buyer side compensation") no longer automatically baked into the cake on listing agreements, listings have become more valuable and buyer agents have been marginalized.

Accordingly, brokerages are now more reliant on listings (which offer more certainty on compensation) for their survival than ever before.

As I have written about previously, there is much debate and uncertainty about what role (if any) Zillow should play in this changing world order.  Zillow is not a real estate brokerage - it is a marketing company.  It owns exactly zero listings, yet by effectively advertising and promoting listings on its platforms it gains control over thousands of potential buyer leads, which are sold off to individual brokerages and agents for referral fees of up to 40%.

Should Zillow be able to profit off the listings of other brokerages?  Should brokerages willingly share their data with Zillow?  Is Zillow an industry partner, or a giant parasite on the rear end of the real estate industry?

The proposed merger with the brands of Anywhere, Inc. would give Compass control over more than 25% of all listing inventory in the US.  If Compass decides to take that listing data "in house" and withhold it from Zillow (and potentially the entire MLS system), the online landscape for real estate listings changes overnight.

Under this scenario, Compass becomes a destination website for home shoppers because Zillow would lose a huge portion of its data feed.  Outside brokerage cooperation would become a thing of the past as the industry pivots into a tribalized collection of large firms that would list, market, negotiate and close deals in house - without the help of outside agents, Zillow or the MLS.

This is similar to the European model for selling real estate and it would leave Zillow (in particular) on the outside looking in, left to work with a consortium of breadcrumb brokerages fighting for whatever is left of the market.

Change is often born out of necessity and with transaction counts down 35% or more from the pre-pandemic era, playing nice isn't a given anymore.  There's simply not enough revenue to support all the players at the table, and the Compass-Anywhere deal would move Compass into position to chart a bold new path.

The Sitzer-Burnett class action verdict created chaos out of an orderly system and fractured a sales process that has served consumers well for more than a century.  Other than the plaintiff attorneys, who pocketed more than $200 million from the Sitzer-Burnett settlement, I don't know who benefitted from it.  The viability of the entire shared-data MLS system is now in doubt and the only question is who will break it first. 

Zillow is dependent on shared data.  Large brokerages with actual listings are not.

THE SUMMER OF EXPIRED LISTINGS

There are three ways listings come off the market.  They either sell, they are withdrawn, or they expire.

A sold listing is exactly as it sounds.  Buyer makes an offer, seller accepts, contract proceeds to closing.

A withdrawn listing is one that is temporarily taken off the market.  Sometimes this is so the seller can make repairs or it could be the seller is leaving town for a few weeks and doesn't want the home show while out of the area.

But often, a withdrawn listing is an indication of a larger problem, which leads to the home being permanently pulled from the market, at which point it becomes an expired listing. 

While active inventory counts are up 25% from a year ago, the number of withdrawn and expired listings are up almost 90% versus 2024.  This is indicative of a market where buyer expectations and seller expectations are not aligned, meaning a lot of sellers are throwing in the towel rather than adjusting to the realities of the current market.

Take a look at the withdrawn/expired listing counts from just the past six months:

March 2024 - 899 withdrawn/expired

March 2025 - 1,266 withdrawn/expired

April 2024 - 930 withdrawn/expired

April 2025 - 1,392 withdrawn/expired

May 2024 - 1,014 withdrawn/expired

May 2025 - 1,720 withdrawn/expired

June 2024 - 1,145 withdrawn/expired

June 2025 - 2,379 withdrawn/expired

July 2024 - 1,352 withdrawn/expired

July 2025 - 2,796 withdrawn/expired

August 2024 - 1,522 withdrawn/expired

August 2025 - 3,424 withdrawn/expired

What you can clearly see here is the pace of withdrawn and expired listings compared to last year has accelerated significantly over the past few months.  

Call it the "Sellers Summer of Discontent".

Homes are still selling in our market, but it takes a legitimate value proposition to entice a buyer today.  Price, condition and location matter more today at any time in the past 15 years. 

This has been a year of difficult conversations, because many sellers either don't want to hear to don't believe hat we're living through a totally different market than the one they have known for the past 10+ years.

For each two listings that sell right now, a third is being pulled from the market.  More than 25% of all listing properties are dying on the vine without selling, which is a real problem.

A sizeable percentage of agents simply don't know how to operate in this market, as many have never experienced anything other than multiple offers and bidding wars.  The market of 2025 is a different animal, and we're on track to see more than 20,000 homes either withdrawn or expired by the end of the year.

That means expectations are out of alignment with reality.  A large number of agents on focused on securing listings, but securing a listing doesn't mean you're going to be able to sell it.

This also means a lot of these failed listings are going to come back into the fold in early 2026, which indicates we're going to have highly elevated inventory counts early next year compared to previous years.  

There is no silver bullet that will magically sell your home like it's 2021.  It boils down to price, condition and location.  Plus a dose of reality about how to position it in a market where buyers are skittish, the economy is uncertain and many agents don't have the courage, skillset or will to engage in difficult conversations up front.  

HOW CAN THE MEDIAN HOME PRICE BE RISING WHEN PRICES ARE FALLING?

Last week, the Denver Post reported two seemingly contradictory items - that active inventory in the Denver metro area had topped 14,000 listings for the first time since 2011 while the median home price actually increased by just under one percent from a year earlier. 

This paints a deceiving picture because I hate to break it to you... but home prices are definitely falling.

The median home price is simply the number at which half of the homes sell for more and half of the homes sell for less.  It's a closely followed metric because it is considered to be more representative than the average home price, which can be swayed by outlier high-end sales.

Median home price numbers also look backwards - at closed sales.  

It's always been my preference to look forward, which means focusing on current active inventory counts and pendings from the past 30 days... rather than closed sales, which tell you where the market was 45 - 90 days ago.

Right now, our absorption rate numbers are downright ugly.  If three months of inventory represents a balanced market (which is my view), consider the following comparison between July of 2025 and July of 2024:

July 2025 vs July 2024

$0 - $250k:  6.37 months of inventory / 3.76 months of inventory

$250k - $400k:  4.41 months of inventory / 2.55 months of inventory

$400k - $600k:  3.24 months of inventory / 2.09 months of inventory

$600k - $1M:  3.76 months of inventory / 2.35 months of inventory

$1M and Up: 5.02 months of inventory / 4.24 months of inventory

These forward-looking numbers make it quite clear that prices are in the process of coming down.  

The reason the median price is up isn't because prices are rising... it's because the bottom of the market has totally washed out and there aren't any transactions happening there.  

When you don't have any sales of $300k condos, for example, the median price is going to go up because, comparatively speaking, there is a much larger cluster of homes selling between $400k - $1M.

To illustrate this, right now there are a total of just 647 homes under contract below $400k in the metro area, while there are 2,982 homes under contract between $400k - $1M.  That much higher transaction count further up the ladder drags the median price up, but it doesn't reflect what's really happening inside the market.

Zillow's "Home Price Index" (HPI), which puts more weight on repeat sales of existing homes than what types of homes are selling... paints a very different picture.  For the Denver market, Zillow's HPI peaked three years ago in July of 2022 at $613,526.  It's HPI for July of 2025 is $558,705, which represents a decline of almost 9% from the peak.  

That's much more aligned with reality.  

Admittedly, I have taken a more bearish view of housing over the past 24 - 36 months than most of my colleagues.  But after 30 years in the industry, I have learned that looking forward is a far better indicator of where things are headed than looking back.  

The second half of 2025 is going to be rough for a lot of sellers, agents and lenders.  Prospective buyers are going to continue to pull back until they see some green shoots in the housing market.  

Bookmark this post and look back at it later this fall, and you'll see that the writing was on the wall.

Reality is going to bite until rates come down or prices re-calibrate to bring some degree of affordability back into a totally broken housing ecosystem.  

CHECKING IN ON DENVER'S 2025 SPRING MARKET

If you have followed the Front Range real estate market for any period of time, you know that buyers tend to show up early in the year and inventory tends to rise as we get closer to the end of the school year.  This year, pendings have been almost even with 2024 but active inventory is rising... significantly.

I've always educated my clients that the optimum time for listing a home in the Denver metro area is from mid-January until about mid-May.  This is based on years of following absorption rate trends - in short, the absorption rate is a calculation that determines how many weeks (or months) it would take to sell a home based on the current pace of sales.

In 2024, for example, our lowest absorption rate occurred in April with 1.54 months of inventory (MOI)... and our highest absorption rate was in November, with 3.17 MOI.  Hence, best for sellers in the spring, and best for buyers in the fall.

In 2022, our lowest absorption rate was in February with 0.32 MOI and our highest absorption rate was again in November, at 2.45 MOI.  Again, a far better selling environment in the spring than in the fall.

If you're selling, you obviously want the greatest leverage versus buyers, which is reflected by a low absorption rate.  Conversely, if you're buying, your maximum leverage is when there are more sellers than buyers, which is reflected by an elevated absorption rate.

As of March 31, our market currently has 2.42 MOI, which is significantly higher than this time in recent years.  If fact, if you look at the absorption rate in March over the past six years, we had 1.43 MOI in 2019... 1.23 MOI in 2020... 0.41 MOI in 2021 (3% mortgages)... 0.43 MOI in 2022 (4% mortgages)... 1.14 MOI in 2023 (6% mortgages)... and 1.66 MOI in 2024 (closer to 7% mortgages).

This means at the current pace of sales, it would take almost 2.5 months to sell all of the homes currently on the market.  In my view, anything over 3.0 months constitutes a buyer's market. 

There are currently about 8,400 active listings on the market.  This is up 51% from the same time in 2024... up 106% from 2023... and up 383% from the unhinged crazy spring market of 2022.

What does it all mean?  Based on historical trends, 8,400 active listings in March could put us on track for 13,000 - 14,000 active listings by Labor Day, which would be the highest inventory count since 2011.  If demand remained just equal to 2024, that would equate to ell over 4.0 months of inventory.

The bottom line is that sales are still happening, but buyers have more choices... lots more choices.  To be successful in this environment, sellers needs to have a tangible value proposition... which means it either needs to shine like nothing else on the block ot be priced ultra-competitively vs recent comps.

In a related state, 35% of all homes that have gone under contract in the MLS this year have come back on the market at least once.  By comparison, in spring of 2022 this figure was 5%.  In other words, in 2022 (with 3% mortgages) 19 out of 20 homes that went under contract closed with that first buyer.  Today's it's more like two out of three.  Yikes.

The only way to combat this is to pay extreme attention to every aspect of the home selling process.  From pre-market prepwork to excellent staging to professional photography to well-promoted open houses to engagement with each and every agent who shows your listing... in this market, everything truly does matter.  

The market of 2025 has been much more segmented than in previous years.  There are most definitely hot pockets and cold pockets.  Three of my six listings this year have attracted multiple offers.  Location is a huge factor.  But so is condition and pricing.  As I've said repeatedly for the past two years, if you're selling a home, your motivation needs to be an 8, 9 or 10... not a 5, 6 or 7.  

When will things turn around?  The frustrating answer is that no one knows.  But demand repressed is not demand destroyed.  There are thousands of aspiring buyers on the sidelines, waiting for rates (or prices) to come down so that home ownership - the Great American Dream - is attainable once again.

WHAT THE FIRST FOUR WEEKS OF 2025 HAVE TAUGHT US ABOUT THE DENVER HOUSING MARKET

Two things can be true at once.

The first truth is that active housing inventory was up 57% in January versus a year ago while pendings are only up nominally.

And the second truth is, despite these much higher inventory counts, it's still the best time of year to put a home on the market.

I can't sugarcoat things here - the old market is gone.  The number of homes for sale in January was up 57% versus 2024... up 77% from January of 2023... and up (are you ready for it?) 523% from the housing market insane asylum known as January of 2022.

In other words, there are a lot of homes for sale.  And with mortgage rates in the 7% range, affordability remains severely constrained.  

Historically, we start each year with inventory at its lowest point and then inventory climbs right through the spring and summer, peaking around Labor Day.

Last year, inventory increased 129% between January and August.  In 2023, inventory climbed 75% between January and August.  If you take the average of the past two years - 102% - and then apply that to our current inventory count, it's not unreasonable to believe we could have more than 14,000 homes on the market by he middle of this summer.  That would be the most inventory we have had for sale since 2011. 

Now it is also true that demand picks up as you move into spring.  In fact, if you're looking for a silver lining, pendings were up 19% in January versus January of 2024.  So we actually have more buyers in the market right now than a year ago - we just have more new listings than new buyers.

What this means is if you have a home to sell, you can list in the current environment... with 7,000 other homes for sale.  Or wait until summer, when you could see 14,000 (or more) competing listings on the market.  The math on that is pretty clear to me.

One significant development at the end of 2024 was that more than 4,600 listings either expired or were withdrawn from the market in December.  That's the largest year-end inventory drawdown of inventory I have seen in 19 years in Colorado.  To me, this represents the dead underbrush of the market, mostly stale listings that were overpriced or just lacking an overall value proposition.

That means even though there are more listings, there is less junk.  And so for attractive homes in good areas, competition can still be a thing.  One of my Summit Home Sales partners experienced a five-offer bidding war on a $900k home backing to open space last month.  And I showed several homes to buyers in January that came off the market in a week or less.  

But it all boils down to value proposition.  

Buyers want one of two things... it either has to be in elite condition in a great location... or it needs to be priced more attractively than anything else on the block. 

The rest of the market lands in the mushy middle, and even with more buyers coming back, it's the homes with the strongest value propositions which sell first.