Number of Active Listings
I have been a real estate agent for a decade. Involved in the overall real estate industry for 2 decades. There has never been a market or time like I have seen the last 2 years in Denver and the Denver Foothills. As a real estate agent I find these times rather unprecedented. I have never seen inventory so low. Almost every home that is for sale in every market is having back to back showing. Almost every home in every price point is getting multiple offers. Real estate agents in Evergreen are seeing some of the most competitive and crazy times in their career. I know I am.
IF you look at the chart on the right you will see a staggering tale of the real estate market. This chart is showing number of active listings of the last 2 years on the entire Denver MLS. We are about 25% of the peak number of listings. We are at about 33% of this time last year. As a real estate agent this makes me feel for the buyers. This kind of market makes most Realtors uncomfortable. Buyers are taking risks they should not need to in order to win the offer.
There is no doubt this is a tough time for buyers right now. Realtors do not like to have an unbalanced market. Buyers have been taking some risks that make me slightly concerned in order to make their offer more appealing to sellers. Most of the time you can be sure you will be competing with at least one cash offer. A cash offer is now viewed as basically the same as a loan. So thinking you are making a strong offer because it is cash is not always the case. Some buyers are willing to take that risk just to get the home under contract.
Average Sale Price
The next metric I like to point out to show the strength of our real estate market is the average sale price. Thankfully this number is not as drastic as the number of active listings number. Although it is rising at a nice steady pace over the last 2 years it is not a roller coaster. It is a nice gradual and healthy appreciation. Just a reminder that this number is the entire Denver MLS and some areas are doing better than others. This number is showing us that the market has determined that the rising prices are not a bubble but they continue to prove value month after month at a steady pace.
Another story it tells is that even though some buyers are taking risks they are not going too far overboard on price. That is a good thing. If this was a shorter time frame or more drastic I would be concerned this is more of an emotional buying habit.
The question I continue to get is “is the Colorado real estate market in a bubble?” My answer is I am about 90% sure this is not a bubble. This is a healthy growth market in a very desirable area.
The Real Estate Market in the Denver and Denver Foothills in a Nutshell
There is no doubt this is a tough time for buyers right now. It is a frustrating time to be a real estate agent. Realtors do not like to have an unbalanced market. As a real estate brokers we understand the market needs to have transactions to stay healthy and to continue to “prove” value, As mentioned before. The less number of sold units makes the market value a little less “confirmed”. For example if 1,000 units sell to help raise the price it is way more believable the market is truly going up as apposed to 10 homes that help push up value.
Buyers have been taking some risks that make me slightly concerned in order to make their offer more appealing to sellers. They are trying everything to beat out the competition. Most of the time you can be sure you will be competing with at least one cash offer. That isn’t really the big perk it once was. It is pretty common now in this area. A cash offer is now viewed as basically the same as a loan. The reason is that at the end of the day the same amount of money ends up in the seller’s bank account the bottom line is they care about. So thinking you are making a strong offer because it is cash is not always the case.
The other thing we are seeing buyers do that makes buyer agents a bit nervous is buyers are not only removing inspection objection, they are removing inspection termination. As a real estate agent I would never recommend my sellers to do this unless they are willing to sacrifice their earnest money. Think of it this way, you still have the right to inspect so you do. If you find the home has a major defect like a structural issue you can still pull out but the seller will get to retain your earnest money. So some buyers are willing to take that risk just to get the home under contract. In our market that can be a 15K-40K gamble since that is the average amount of earnest money on our contracts in this market.
The Year Moving Forward
As a real estate agent I really hope for everyone’s sake, we see some more inventory come on the market in the spring. I really think this will be the case. Since the average time people stay in their home these is about 5 years there should be some sellers listing this year. Our boom in Denver and the Denver Foothills started between 6-4 years ago. That is when buyers started buying homes that didn’t suit their all their needs. That and the crazy amount of equity they have built in recent years is making people itching to cash in on their gains.
There is no doubt Covid has played a roll in this crazy market. One way is we had about 2 months of no transactions. After those 2 months we have seen less and less sellers wanting to list their home if they currently live there. They don’t seem to want to have so many strangers walking through their home. We are seeing a good deal of vacant homes on the market. Way more than occupied homes. This is not typical pre Covid.
My real estate crystal ball is saying that buyers will gain more control in the spring. We will still see longer days on market and less crazy buyer offers along with less multiple offer situations. It really has to. Although this is a very desirable area with good home value appreciation, things need to calm a bit. We can not sustain the appreciation we have seen over the last couple years. If we do people will find another place to move that is a little more reasonable.