How Much Has the Metro Real Estate Market Slowed?  Here Are Some Statistics.  

We all recognize that the Denver metro real estate market has slowed, but by how much?  I did some statistical analysis this past Sunday, and here is what I found.

Among the 4,061 active listings in the 5-county metro area (Denver, Jeffco, Adams, Arapahoe and Douglas), the median days on market is much higher than it has been — 16 days. That means that more than half the active listings have been on the market over two weeks. Earlier this year, the median DOM was under 10 days. The median price of the active listings is $650,000.

1,130 of those listings were entered on REcolorado in the past 7 days. Notably, 818 of those listings (more than 20%) had price reductions in the last week, and during that same period 167 listings were either withdrawn from the MLS or expired without selling.  That alone is a sign of a slowing market.

As of Sunday evening, there were just a few more listings under contract than active — 4,159.  The median days on the MLS for them was only six.  Only 22.6% of the pending listings took more than 16 days to go under contract, which, as stated above, is the median days on market of the current active listings.  About 11% of the pending listings had been active over a month. Just 1.4% of them were active over three months.

3,370 listings in the 5-county metro area closed between June 1st and 26th, not counting the ones that were sold without ever being active on the MLS. Their median length of time on the MLS before going under contract was just 4 days and the media ratio of closed price to listing price was 101.9%, substantially down from the peak of 105.9% in April and 104.3% last June.  The median closed price was $600,000, down from a high of $615,000 in April but up 11.6% from $537,500 in June 2021.

I like to study how the price per square foot varies from year to year or month to month, and those statistics are shown in this chart. Again, June statistics aren’t yet available, so I’m just showing the January through May stats for the past five years as compiled by REcolorado for the 5-county metro area. As you can see, 2022 has broken through the $300/finished sq. ft. level and is staying there.

Now let’s look at “inventory.” In June of last year, the end-of-month count of active listings in the 5-county metro area was 4,473, so Sunday’s late-June count of 4,061 active listings is down by almost 10%, and I would guess the end-of-month count won’t be much different. In June 2021, there were 7,689 new listings, and the number of new listings entered on the REcolorado from June 1-26 was only 4,997, not counting 58 “coming soon” listings, so it appears that sellers are holding back, knowing that the market is softening, rather than rushing to sell before it softens further. Which is the best strategy? It’s hard to tell.

There’s little doubt that if a seller wanted to sell at the top of the market, they missed that opportunity. Rita and I chose to “cash out” in March, selling our home and moving to Avenida Lakewood. But, just like with selling stocks, missing the top of the market is not the worst situation, if you can still sell your home for 50%, 100% or 200% more than what you paid for it just a few years ago. At the same time, only sell if it fits your life plan.

Buyers are in a different situation, of course.  On the one hand, the market is softening and there are fewer bidding wars — especially among homes that have been on the market 10 days or more, which your agent can help you find. On the other hand, unless you’re a cash buyer, the interest rates are approaching double what they were last year. Should you not buy because rates are over 5% now?  The interest rate was 13% when I bought my first home, so interest rates are really just “normal” if you put them in a historical context.

The bottom line is that you can still sell your home for a fair price, and you can still buy a home for a fair price and with less frenzy. For sellers, pricing your home correctly is more important than ever. Pricing it based on what you saw in your neighborhood three or six months ago might cause your home to sit on the market, and you’ll probably have to lower your listing price one or more times before you get an offer — which may be less than if you had priced your home that way in the beginning. As I’ve said in the past, you really can’t underprice your home, because it will only attract more buyers and help to bid it up, but you can certainly overprice your home.

My advice to buyers is to concentrate on homes which have been on the MLS 10 or more days, because those sellers will be more motivated and, unless they just reduced their price, you probably won’t be competing with other buyers.

For both buyers and sellers, don’t put a lot of weight on what Zillow says your home is worth. This was never a good idea, and even less so now. If your agent is a Realtor (not all agents are), he or she has access to my favorite valuation software, which is called Realtors Property Resource or RPR.  A second valuation software that is available to every MLS member is Realist, which uses a different algorithm than RPR, so it gives you a second opinion. Usually the correct value for pricing purposes is somewhere in between those two valuation models. 

The best valuation, however, is one which your listing agent can generate, as I do, on REcolorado. Below is the spreadsheet that I created for a home that I listed on April 13 — just as the mortgage interest rates began to explode — and sold in 5 days. The RPR and Realist reports suggested a price around $700,000. Using the grid below, the seller agreed to list the home for $735,000. We sold it for $831,000. You can see from the chart that the listing price was clearly in line with comparable sales in the neighborhood, but if we had listed it for $800,000 or more, I’m confident it would not have sold for the price it did.

Ask your listing agent to do this kind of analysis for your home — or, better yet, call me or one of our broker associates below, since we have mastered the process of creating this kind of comp analysis.

Price Reduced on Renovated Ranch in Wheat Ridge  

David Dlugasch’s listing across from the Clear Creek greenbelt at 11000 W. 41st Pl. is now priced at $865,000. You can take a narrated video tour of this beautifully renovated home online at www.WheatRidgeHome.info. Then call David at 303-908-4835 to arrange a private showing..

We Can Save You Thousands of Dollars on Moving Costs  

Even if you’re moving locally, the cost of hiring two men and a truck or a bigger moving company can run into the thousands of dollars.

At Golden Real Estate, we have offered our free moving truck to buyers and sellers for almost two decades (this is our second truck), saving our clients hundreds of thousands of dollars. Throughout those years we have also provided free moving boxes, packing paper and bubble wrap, saving them additional money.

We have also helped buyers win bidding wars by offering the seller totally free local moving using our truck, movers, boxes and packing materials.  They just “pack and unpack”!  We call it Golden’s “Free Community Truck” because we also make it available free to local non-profit and community organizations such as BGoldN, Family Promise, Christian Action Guild, Lions Club, Habitat for Humanity, and others.

Realtor Magazine: Builders Need to Respond to the Home Electrification Trend  

It isn’t in the print edition of Realtor Magazine, but a June 8 article on its website is titled, “The Future Is Now: Home Electrification.”

Regular readers of this column know that home electrification has been “now” for many years here at Golden Real Estate. At the Net Zero Store in our former building at 17695 S. Golden Road, Helio Home Inc. is busier than ever responding to people who want to replace their gas forced air furnaces with heat pump units and their gas water heaters with heat pump water heaters. (You can reach the Helio Home sales team at 720-460-1260.)

The primary focus of the Realtor Magazine article is on the need for home builders to include a larger electrical service as fossil fuels are phased out. Number one, it said, was to accommodate an electric car, since the major car manufacturers are committed to going all-electric or mostly so by 2030.

The article promotes the idea of installing solar photovoltaic (PV) systems to generate electricity for your home and car. With such a system, the author of the article correctly points out that the electrical grid can function as your home battery (thanks to net metering), but seems not to understand how it really works. He states that the utility will buy your excess solar generation but you might have to buy electricity for your car on a cloudy day. In fact, net metering allows you to send surplus electricity to the grid when you don’t need it, but you get it back at full value when needed. Everyone with a solar PV system should take advantage of the “roll-over” option allowing you to be credited for that surplus production long-term rather than get a check each January for the previous year’s over-production.

When the utility pays you for your surplus production, it does so at its cost of generating electricity — a couple cents per kilowatt-hour. But if you use your surplus electricity, you save the full retail rate (over 10¢ per kilowatt-hour) versus purchasing those kilowatt-hours from the utility.

Not understanding that process, the author promotes the idea of a home battery system, but, as I wrote before, that only needs to be considered if you have medical equipment which must run during a blackout.

The author promotes the installation of a 240V car charging station, suggesting that this could require a larger electrical panel in older homes. I disagree. The Level 2 charging station only draws the same electricity as your electric clothes dryer. If your panel can’t accommodate a dedicated circuit for the car, you could use the same one as the clothes dryer and not use both appliances at the same time. (I recognize that this is not what the code dictates, but it’s still safe if you have a 40-amp breaker on that circuit, because if you do run the dryer and the car charger at the same time, it would trip the breaker.)

Also, every EV comes with a 120V cord to plug your car into a standard household outlet. Although that only gets you 4 miles of range per hour, that’s still over 50 miles of range overnight, which may suffice, especially if you have other charging options during the day. Downtown Golden, for example, has ten free Level 2 charging stations in its garages and elsewhere.

Of course, there’s more to home electrification than car charging. The article points out that there are now electric outdoor tools—lawn mowers, leaf blowers, snow blowers, chain saws and more—that you can buy online or at Lowes. Ego Power is the biggest brand in this field, and their various tools all use the same interchangeable batteries.

Not mentioned in the article are the biggest consumers of fossil fuels—your gas furnace and water heater. As I said, you can speak to Helio Home about converting gas units to electric heat pump units.

For cooking, I have written in the past about induction electric ranges, and I’m really fond of our electric grill shown here. Lift it off its stand and you can use the grill on your countertop. You can’t do that with a gas grill! And it plugs into a standard 120V patio outlet. We bought ours at Home Depot for $100. Food grilled on it tastes just as good as when cooked on a gas grill.

Can the electrical grid handle the increased use of electricity over fossil fuels, given, for example, that by 2030 over 50% of car sales in America will be all-electric? You may have read warnings that widespread adoption of EVs will overwhelm our electrical transmission systems, but I disagree. Solar panels are being installed just as quickly and perhaps more so, and that electricity is consumed within your neighborhood if not by yourself, reducing the needed distribution from the utility. And, as I said, even with Level 2 charging, an EV only draws the same amount of electricity as a clothes dryer.

Home builders can and should adapt to this trend, and are in fact required to do so in some jurisdictions. Every new home should be solar-ready if not solar-powered, by building chases into the home which could accommodate the electrical lines serving roof-mounted solar panels. Also, garages should be wired with a 240V outlet on their front walls in addition to the usual 120V outlets on three walls.

I was encouraged to see that a new 300-unit apartment complex about to break ground in Lakewood between Colfax and 15th Place and between Owens and Pierson Streets is, according to the plans I saw, going to have over 40 EV parking spaces in its garage.

One of the more interesting flaws in the Realtor Magazine article was the suggestion that home garages should be insulated or even heated to avoid shortening the life of an electric vehicle’s battery. This is a misinterpretation of the fact that EVs lose range in the winter. It’s not that the battery loses power in cold weather, but rather that heating the car’s cabin uses battery power which thereby reduces the car’s range, as does the heating of the battery itself to its optimum operating temperature.

Price Reduced on Lakewood Home Near Solterra  

Now Listed at $795,000

This light-filled home at 2384 S. Holman Circle is in a quiet neighborhood just five minutes from both C470 and I-70. Originally listed at $850,000, the price was just reduced to $795,000. Nearby parks include Coyote Gulch (a 5-minute walk), Green Mountain, and Bear Creek Lake.  Cycling and walking trails abound! The home is beautifully updated, as you’ll see in the narrated video walk-through. There’s a main-floor office/den, and the large loft could be enclosed to create a 4th bedroom. The kitchen is a delight with its quartz countertops, under-cabinet lighting, stainless steel appliances, and marble backsplash. The yard is beautifully landscaped, front and back. The backyard has a calming rock waterfall surrounded by a large perennial garden and mature trees. The lovely shaded deck, installed in 2020, creates the perfect no-maintenance space for outdoor entertaining and relaxing. This home has been well maintained by the seller and is in immaculate condition. You can take a narrated video walk-through of this listing at www.LakewoodHome.info, then call your agent or 303-525-1851 to see it.

https://youtu.be/lVW0yzDCUOg

Wheat Ridge Rehab Listed by David Dlugasch  

Listed for $898,000

This newly renovated home at 11000 W. 41st Place is on a quiet cul-de-sac conveniently located near I-70 and great shopping. It is an open concept home with stunning high-end finishes throughout. The main level has hardwood flooring and 3 bedrooms, 3 bathrooms, including the primary bedroom with a huge walk-in closet and completely tiled bath. The large kitchen opens up to a bright family room with a modern fireplace and vaulted ceilings, sliding glass doors that lead to a large patio and fenced-in yard. The backyard is private and great for entertaining friends and family. The lower level has an open area that can be used as a family room, home theater, or game room. It has a full bath, large laundry room and 4th bedroom with double closet. The detached one-car garage is oversized with plenty of storage space. The upper level of the garage can be used for storage or maybe a studio. Come see this gem! More details, pictures and a video tour can be found at www.WheatRidgeHome.info.

With the Rise in Mortgage Interest Rates, ARMs Are Making a Comeback and Can Save You Money

As mortgage interest rates rise, many potential homebuyers have asked me about the wisdom of using an adjustable-rate mortgage loan (often referred to as an ARM) to finance their home purchase. 

Adjustable-rate mortgages, also known as “variable-rate mortgages” are mortgages that offer a low introductory interest rate for a specific period of time. The borrowers’ interest rate and correspondingly their monthly principal and interest payment will be “locked in” for the first five, seven, or ten years. For example, a 10/6 ARM means that you will pay a fixed interest rate for 10 years, then the rate will adjust every 6 months. A 7/1 ARM, on the other hand, means that your rate will be fixed for 7 years and then the rate will adjust every year.

Because the lender is not “locking in” the interest rate for a 30-year period, the borrower is sharing in the risk associated with rising rates. In exchange for the ability to increase the borrowers’ rate based upon future market conditions, lenders offer lower rates for ARMs than they do for 30-year fixed rate loans. The lowest ARM rates are offered on shorter terms, as an example, a 5-year ARM will have a lower rate than a 10-year ARM. The difference in today’s pricing for a 5-year ARM versus a 30-year fixed rate is approximately .75%, with a 5-year ARM being offered at 4.25% and a 30-year fixed rate loan being offered at 5.00%

Borrowers considering an ARM should know which index will be used to calculate their new interest rate, as well as the “margin” that will be added to the indexed rate to determine the “fully indexed interest rate” at the time of adjustment. While this might seem extraordinarily risky, all loans offered thru FNMA and FHMLC (and most jumbo lenders as well) “cap” the increases that can occur at each adjustment period as well as the maximum amount that the rate may increase over the life of the loan. Unlike the ARMs of previous years, borrowers are not allowed to make partial interest payments, so there is no risk of the loan amount increasing as the rate increases.

The most obvious benefit to choosing an ARM is lower monthly payments. While homebuyers will have to qualify for the loan based on the future higher payment price, they can take advantage of the lower payments by investing the savings somewhere with higher gains, making home improvements, or adding more to the principal balance to pay off the loan more quickly.

ARMs are typically best suited for borrowers who do not anticipate that they will still own the home at the time of the initial adjustment or those who anticipate increases in income that will keep pace with interest rate increases. If a borrower’s circumstances change, there is always the option to refinance into a fixed rate loan. Unlike ARMs of the past, there are no longer prepayment penalties to dissuade the borrower from refinancing once the initial fixed interest rate ends. If you decide to refinance from an ARM to a fixed-rate mortgage, the refinancing process is straightforward and is similar to when you purchased your home. When you refinance, you take out another loan that is used to pay off your original note, then your new payments are based upon the new loan.

As the housing market continues to change, Jaxzann Riggs, owner of The Mortgage Network, is available to answer questions and help you decide which loan options are best suited for your current needs.

You can reach out to Jaxzann with any questions at 303-990-2992.  Mention that I suggested you contact her.

Zillow Has Published a Primer on Home Solar — Here Are My Reflections on It  

On April 27, Zillow published an article, “6 Questions to Ask as You Consider Home Solar.” I thought it was pretty comprehensive, but it was written for a national audience, and some of the questions are readily answered for us here in Colorado.

The article begins by asserting that, according to Zillow’s research, homes which highlight eco-friendly features like solar sell up to 10 days quicker and for 1.4% more than homes that don’t. That statistic, however, fails to distinguish between homes which have fully-owned solar installations, and homes that have leased systems or “power purchase agreements.” Those alternative arrangements basically create a situation in which the homeowner purchases electricity from two companies instead of one — still a good deal, since the solar power typically costs less than the power purchased from the utility.

Zillow’s question #1 is whether your home is suitable for solar. We all know, of course, that a south-facing roof without shading is best, but there are other considerations, such as the condition of your roof. If your roof needs replacing before you put solar panels on it, you may want to include Roper Roofing & Solar in Golden among the solar companies you interview. It’s the only solar company I know which is also a roofing company.

One question posed by Zillow is whether your HOA (if you have one) will allow solar. Fortunately, Colorado passed a law over a decade ago (C.R.S. 38-30-168) which requires HOAs to allow solar and other sustainable improvements. HOAs can regulate appearance but not prohibit solar. For example, it could require that solar panels be flush with your roof rather than angled out from it.

The article points out that if your home is not suitable for solar, you should look into community solar, for which it provides a link. Community solar is also a good alternative for renters and condo owners.

The second question is how to find a reputable installer. Personally, I prefer to hire a small (and local) family-owned company over a national business with a local sales team. I recommend Golden Solar, which has installed five systems for me over the past two decades, and Buglet Solar Electric. The owners of those two companies, Don Parker and Whitney Painter, can answer question #3, which is what incentives and rebates are available on the federal, state, local and utility level. The current federal incentive is a 26% tax credit, which drops to 22% next year and expires the following year unless Congress extends it.

Question #4 is whether there’s net metering, which allows you to “bank” your daytime production for nighttime use and carry forward your surplus solar production to future months and years. In Colorado, the answer is a resounding yes.

Question #5 is about battery storage. Net metering, in my opinion, makes home battery backup/storage unnecessary unless you are worried about power outages. (If you have life-sustaining equipment that requires uninterrupted electricity, battery storage might be appropriate.)

Where battery storage is essential, of course, is in off-grid applications, such as in a mountain cabin without accessible electricity from a utility.  I have listed such homes with impressive battery systems.

The last question which Zillow poses is whether a solar installation is worth it, admitting that this is a very personal decision.

A solar installation nowadays costs between $10,000 and $20,000 for the typical home, and you can ask the companies you interview what the return on investment will be. I have never worried about ROI, because installing solar, to me, is simply the right thing to do, satisfied as I am that it does pay for itself, whether in five years or ten.

One piece of advice not in the Zillow article is to factor in the increased electricity you will need when you buy an electric vehicle — which you will at some point, since most manufacturers plan to phase out gas-powered vehicles. Xcel Energy lets you to carry forward surplus generation from year to year, and allows you to install solar panels equivalent to double your last 12 months’ usage. (Do NOT elect to receive a yearly check from Xcel Energy for your excess solar production, because they pay you a small fraction of that electricity’s retail value — carry it forward for future use at its full retail value.)

Affordable Ranch Listed by Jim Swanson  

Listed at $559,000

This move-in ready south-facing ranch home with updates at 3865 W. 63rd Ave. is ready for new owners. It has an Arvada address but is in unincorporated Adams County. The corner lot and low-maintenance yard is great for pets. The open floor plan features a large living room with vaulted ceiling, plus a dining area with French doors adjacent to the kitchen. Quality kitchen appliances are included. There are 2 bedrooms and 2 baths on the main level, and 2 bedrooms, a full bath, and a nice family room in the basement. You’ll like the high ceilings in the basement. Built in 1987, the Arlington Meadows neighborhood has great access to Denver and Interstates 25, 76 and 70. The Tennyson light rail station is only 10 blocks away, as well as the large Tennyson Knolls park. View more pictures and take a narrated video tour at www.ArlingtonMeadowsHome.info, then call Jim Swanson at 303-929-2727 for a private showing.

https://youtu.be/uHPJa1e7uIg

Statistics, Oddly, Seem Not to Support the Idea That the Real Estate Market Is Slowing Down  

We all know that the real estate market has slowed down since the dramatic April increase in mortgage rates — right?

Seeking to document and measure that slowdown, I checked the statistics available to me as a member of REcolorado, Denver’s MLS. Below is a chart of the statistics I gathered for the period Jan. 2021 to present. Analyzing that chart, you can see that while there are fewer active listings this May than a year ago, there are roughly the same number of sold listings — and they went under contract just as quickly, with a median days on the MLS (DOM) of just 4. And, more significantly, the median sold price this May was nearly $100,000 higher than May 2021, with a slightly higher ratio of sold price to listing price. April’s statistics year-over-year were even more impressive.

The smaller chart is a 7-day residential “Market Watch” widget that I copied and pasted from the MLS on Tuesday morning. Although I don’t know how to replicate what that chart would have looked like a year ago, it’s safe to say that it’s much different — and does not paint the same picture as the larger chart above. It definitely shows a vibrant market with lots of new, pending and closed listings, but the number of price reductions must be significantly higher than they were a year ago — and 10 times the number of price increases.

So, what does all this data mean for the average homeowner thinking of listing his or her home for sale?

The number of price decreases suggests to me that too many sellers are starting out with a listing price that might have worked in the past, but that is too aggressive for the current market. While the median days-on-MLS is still only 4, you can be sure that those listings lowered their prices a week or more into their time on the MLS.  At the same time, that low days-on-MLS number tells you that the sellers who price their home correctly outnumber those who do not. Good for them. That’s the group you want to be in!

Another obvious conclusion is that while the dramatic increase in mortgage interest rates has impacted many buyers, there are enough buyers who are paying cash or are not deterred by the higher rates, which are still historically low. (When I bought my first home in 1983, I benefited from a subsidized interest rate of “only” 13%!)

Bottom line: Sellers should price their homes less aggressively. Buyers should focus on homes with a DOM over 10 days. That’s where the best deals can be found.