One of the most dependable indicators of a strong “seller’s market” is the number of listings which sell above their listing price, and by how much. Another is the number of days that a listing is on the MLS (“DOM”) before going under contract.
As shown in the chart below, drawn from REcolorado’s data for the period of January 2021 through last month, the seller’s market peaked in May and June of last year but has now surged again. All indications are that the surge will continue through the spring.
Average DOM is always higher than median DOM because there are many homes that languish on the market unsold because they are overpriced, or for another reason. What’s remarkable about this sellers market was how low the average DOM went as even those hard-to-sell homes attracted buyers.
As with the previous surge, the average DOM has sunk below 20 while the median DOM has revisited its all-time low of 4 days on the MLS.
(Note: These statistics are for residential listings in the metro Denver area, which I’ve defined here as within a 25-mile radius of the State Capitol.)
The rising cost of money — that is, the increase in mortgage rates projected for this year — will lure many buyers “off the fence” hoping a buy a home before interest rates rise further.
I foresee a stronger than usual seasonal jump in the number of new listings as spring arrives.
Many people believe, erroneously, that the best time to list a home is in the spring, so those people will be putting their homes up for sale in the coming weeks. In addition, as I wrote last week, many homeowners who weren’t thinking of selling before are likely to decide it’s a good time to “cash out.” But I don’t foresee that increase in supply going far to meet the needs of today’s home buyers, and I don’t see prices leveling off, much less declining.
It surprises many of us that homes are appraising at the high prices they are selling for, but when a winning bidder waives appraisal objection to win a bidding war — which is almost common nowadays — that sale becomes a comp that supports future appraisals at the same price or higher. (On the appraisal form, there’s a place to indicate a rising, falling or stable market, and when an appraiser checks the box that it’s a rising market, that gives him or her more leeway to appraise a home higher than recent comparable sales might otherwise justify, further fueling the frenzy.)
The real estate market is becoming less and less predictable, along with other elements of our economy and society. War could be imminent or a new Covid variant might come. God only knows!