Last week I did my regular update on the state of the bidding wars, but it left me unsatisfied because I knew that the market was slowing, yet the bidding wars seemed just as real, especially in the under-$500,000 price range.
The problem with my analysis was that I only looked at the homes which sold in 1 to 6 days because those are the listings which likely had bidding wars.
This week, I looked at the bigger picture but still limiting my analysis to residential listings on REcolorado that are within 15 miles of downtown Denver.
A chart containing some key statistics over the last 11 months is shown below. Here are my observations, which you can follow by looking at the chart’s columns from left to right.
First, it’s clear that the bidding wars started in earnest in February, when the ratio of closing price to listing price went above 100% for the first time. That ratio peaked in June and fell significantly in July, but is still far above 100%.
The number of active listings is still unseasonably low, but higher than it has been since last November. The number of listings under contract (pending) is lower than it was in May and June, but still higher than any of the other months on the chart.
The number of July closings is probably a bit higher than shown in the chart since I did this analysis on August 1st, and not all July closings had been reported, but it is clearly lower than June’s number, while higher than any other month since last October.
The number of new listings in July was higher than any other month except June, which reinforces what I’ve said for months, namely that the lack of inventory is not due to sellers keeping their homes off the market. Rather, homes sell so quickly that the number of active listings remains low.
The median days active in the MLS (DIM) has not risen, but the drop in average days in the MLS is very telling. The drop to 10 days is stunning and shows that even the homes that don’t sell immediately are selling faster than ever. Last July the number was 21 and in July 2019 the number was 23. In the past five years the average days in the MLS never fell below 16 until this April.
The last column shows that the inventory (in months) of homes for sale hasn’t been above one month since January, although it is the highest it has been since February.
The bottom line, then, is that, yes, the market is slowing but is still crazy hot. The trend, if there is one, is toward a gradual easing of the seller’s market in the Denver metro area, but it is well short of becoming a “balanced” market.
Will the end of the eviction moratorium have a big effect on the market? My guess is that it may increase the number of new listings as landlords, especially small landlords, decide to sell rather than replace their evicted tenants. The opportunity to cash in on their properties’ increased value may be too much for some to resist, and the risk of continued lost income too great for some landlords.
There will not, I believe, be an increase in foreclosures or short sales, because very few property owners are likely to owe more than their property is worth. Because of that, they will simply sell.