Now That the Summer Months Are Behind Us, How’s the Market Shaping Up for Fall?

It has been a wild ride so far in 2021 — and the ride may be slowing, but it is definitely not over.

Below is a chart with some key statistics that I garnered from our MLS, REcolorado.com, for the 13 months ending August 2021, a timespan that allows us to compare this August with last August as well as the months since.

In creating the chart, I limited myself to listings within 15 miles of downtown Denver. That includes the entire metro area except for the city of Boulder.

The headings are pretty self-explanatory except for the last three columns. “Ratio” is the ratio of closed price to listing price at the time of sale, which might, in the case of older listings, be less than the original listing price. “Med. DOM” stands for median days that the listing was “active” on the MLS.  Half the listings went under contract in that number of days or less, and half of them went under contract in that number of days or more. “Ave. DOM” stands for average days that listings were active on the MLS, and it’s always higher than median days on the MLS because many listings are overpriced and linger on the market before the price is lowered and the home goes under contract.

There are some numbers that are worth noting, but there are some numbers that are downright remarkable.  We all know, for example, that the inventory of active listings is very low, but it’s notable that it is more than 40% lower this August than it was in August 2020. The number of sold listings is also lower by over 4% and the number of new listings is lower by 13%.

However, it’s also notable that the number of listings that expired without selling has plunged by over 43% from a year ago. More hard-to-sell and overpriced homes are selling before expiring.

Lastly, it is notable that the median days before a listing goes under contract has barely risen, and that figure has been under 7 days now for over a year.

Those statistics are notable, but there are two statistics that are remarkable. The first one is the ratio of sold price to listing price, which remains above 100% at 101.4%, although down from June’s high of 104.6%. This is remarkable because it was only this February that the number rose above 100% for the first time, signaling the height of the bidding wars. The August figure indicates that many bidding wars are still happening — due in part, of course, to the limited inventory of active listings — but they are not as numerous or extreme overall.

I emphasize “overall” because bidding wars are still getting extreme in isolated instances where the home is outstanding in some way or is in a highly desirable area with little or no competing listings. We are still seeing some homes sell for 40 to even 50% over their asking prices here and there. That includes in my home town of Golden.

So what, you may be asking, is the outlook for the fall and winter months?

If there is any seasonality left in the real estate business, it is that there are fewer new listings in the winter. You can see that was true last winter, with the low point being December. This makes sense, because few people want to put their home on the market during the holidays. That, however, only serves to keep the inventory of active listings even lower than during the summer time, yet the buying of homes continues year-round, with roughly as many closings happening in December as in November. Notice, in fact, that December was the only month in the last 13 where the number of sold listings exceeded both the number of active listings and new listings.

We should stop thinking of spring and summer as the selling season, but rather as the listing season. Most sellers believe it’s the selling season, when in fact homes sell year round. In fact, winter could be the best time to put your home on the market because there are just as many buyers getting those MLS alerts that I wrote about last week, but there are fewer homes for them to look at. 

If you want to sell your home before next spring, you should not wait until next spring to put it on the market — but do take some nice exterior photos of your home now that can be used in the marketing of your home over the winter.

Mortgage rates could start to ease upward in the coming months, but that will only increase the market frenzy as buyers try to get ahead of further increases in interest rates. No one in the industry, however, is projecting a major increase in interest rates over the next 12 months.

Is the Real Estate Market Slowing, or Isn’t It? Here Are Some Useful Statistics.

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.

Bidding Wars Are Slowing — for Higher Priced Homes

This is my regular update on the real estate bidding wars. This week I chose to analyze the closings that occurred last Thursday, July 22nd, to see how the bidding wars have evolved over the past few weeks. As before, the source for this monthly analysis is REcolorado.com.

As I did in previous months, I limited my analysis to sales within a 15-mile radius of downtown Denver. I limited my search to listings that were active on our MLS at least one day and not more than 6 days before going under contract. Those are the homes that likely had bidding wars.

On July 22nd there were 36 closings up to $500,000, compared to 55 closings on June 28th. The median home sold for 6.3% over its asking price, compared to 5.4% on June 28th. The highest ratio this time was 18.5% for a home in SW Denver, compared to 20.8% on June 28th for a townhome in Littleton. Three listings sold for the asking price, and three sold for less than listing price, compared to four and six respectively on June 28th.

There were 48 homes that closed on July 22nd for more than $500,000, compared to 53 homes on June 28th. The median home in that group sold for 3.2% over its listing price, compared to 8.7% on June 28th. Only six sold for the listing price, and six sold for less than the listing price. The highest overbid in this group was 18% for a home north of Denver’s City Park, compared to 32% on June 28th.

To have a statistically significant number of closings over $1 million, I analyzed the 87 such closings that occurred from July 12 to 26. The median closing for those high-end homes was 5.4% over listing price, compared to 6.6% from late June. Nine homes sold for the listing price and 8 homes sold for less than the listing price, compared to 12 and 6 respectively in late June. The highest overbid was 24.8% for a bungalow in the Hilltop neighborhood, which was listed at $950,000 and sold in three days for $1,186,000. Of those 87 homes, 24 were listed under $1 million. Last month four million-dollar homes sold for more than 30% over their listing price.

Are More Contracts Falling Because of Bidding Wars?

A contract on one of my listings fell on inspection last week, but the buyer would not say why and would not release the inspection report. Meanwhile, the inspector had met the seller during the inspection and expressed shock when told that the contract was terminated. The logical conclusion was that the contract fell due to buyer’s remorse, i.e., a change of mind about buying the home.

The buyer and their agent could have simply stated that, because it’s a perfectly valid reason for terminating under the inspection contingency. It practically says as much in the contract itself. (By the way, the home quickly went under contract again with a new buyer.)

The seller asked me how common buyer’s remorse terminations are, given the way buyers are being rushed into making purchase decisions (at inflated prices) due to bidding wars.

So I did some research and found that contracts are not falling at a statistically significant higher rate than they did, say, two years ago during the same week.

Here are the specifics from my   research on REcolorado.com:

Of the 100 highest priced closings in early July that were on the market 1 to 20 days, 8% had a contract fall before a successful closing. During the same time period in 2019, 7% listings had a fallen contract before their successful closing.

Of the 100 lowest priced closings in early July that were on the MLS 1 to 20 days, 15% had a contract fall, compared to the same time period in 2019, when 16% had a contract fall before a successful closing.

It was a reasonable theory, but not true.

An Update on the Ongoing Bidding Wars

This is my regular update on the real estate bidding wars. I was planning to do this analysis next week, but I’ve observed a definite slowing of the market, so I moved my report to this week, analyzing the closings that occurred last Thursday, July 1st, to see how the bidding wars have evolved since my last report. To my surprise, this analysis shows only a slight slowing, likely because those listings went under contract 30-45 days earlier.

As I did in previous months, I limited my analysis to sales within a 15-mile radius of downtown Denver. I limited my search to homes, condos and townhouses that were on the MLS at least one day but not more than 6 days before going under contract, since those are the homes with bidding wars. Once again I divided the results into listings which sold for up to $500,000 and those that sold for more.

On July 1st there were 33 closings up to $500,000, compared to 40 such closings on June 10th. The median home sold for 5.9% over its asking price, compared to 6.3% on June 10th. The highest ratio this time was 20% for a bungalow in Aurora compared to 19.6% on June 10th for a condo in Golden. Four listings sold for the asking price, and three sold for less than listing price, compared to none on June 10th.

There were 44 homes that closed on July 1st for more than $500,000, compared to 37 homes on June 10th. The median home in that group sold for 7.4% over its listing price, compared to 7.7% on June 10th. Only one sold for the listing price, and not one home sold for less than the listing price. The highest overbid was 29.7% for a contemporary 1969 home on Lookout Mountain, compared to 20.9% on June 10th.

To have a statistically significant number of closings over $1 million, I analyzed the 123 closings between June 16th and July 1st. The median closing for those high-end homes was 5.7% over listing price, compared to 6.1% from June 1-13. Fifteen homes sold for the listing price and 9 homes sold for less than the listing price. The highest overbid was for a 1985 home in “The Ridge” south of downtown Littleton which was listed at $900,000 and sold in five days for $1,200,000, 33.3% over listing price.  

Note: 27 of the 123 homes that sold for over $1 million were listed for under $1 million.

How Listing Agents Handle Bidding Wars: The Good, the Bad and the Ugly

I have written in the past about how we handle multiple offers and bidding wars on our listings using an auction style, which we feel is best for our sellers and most fair to buyers and their agents.

Regrettably, very few listing agents handle multiple offers and bidding wars the way we do. Most are sticking with the “highest and best” approach, in which buyers submit an above-listing-price offer without knowing what other buyers are offering.

Usually agents maintain that their sellers won’t let them reveal the competing offers, but I find that hard to believe. Have they even had an honest discussion with their sellers about that? I have that discussion with every seller who hires me and invariably they agree that full transparency about offers in hand is not only going to net them the highest price for their home but is also fairest to the buyers.

I have written in the past that 4 days on the MLS before going under contract is the “sweet spot” when it comes to netting the best price for sellers, and I have supported that opinion statistically.

However, recently we have modified our policy because of more buyers submitting early offers which are too good to pass up. Do we keep our word not to sell before the 4th day, or take the offer?

Rule #1 is that the seller makes that decision, not us. If the seller wants to accept a particularly sweet offer on day one or day two, we ask for 24 hours’ lead time so that we can notify all other agents who have set showings that our timeline has changed. “We have this great offer, and the seller wants to accept it.” That gives those agents time to accelerate their timeline and compete (or not) with that particularly sweet offer.

Regardless of how an agent handles multiple offers, professional courtesy demands that they communicate with other agents and not just ignore the competing offers. Just call us and say, “My seller has decided to go with a better offer.” Give us a chance to recalibrate and resubmit. That’s best for your seller (to whom you owe “utmost good faith and fidelity”), and it’s only fair to the other bidders.

Sometime soon these bidding wars will subside, and we’ll go back to having a “balanced” market. I’d settle, frankly, for a seller’s market that is not crazy wild!

We are still seeing way too many homes that are selling with zero days on the market, often because the listing agent convinced the seller to accept a contract obtained by the listing agent, thereby allowing the listing agent to keep his or her entire commission instead of sharing it with a buyer’s agent.

The Colorado Real Estate Commission frowns upon this practice and has issued guidance that every listing agent should advise their sellers that they may be leaving money on the table (that is, getting less than they might for their home) if they don’t allow the home to be on the MLS for at least a few days so that all interested buyers have a chance to see it and make an offer.

Along that vein, the National Association of Realtors last November adopted a “Clear Cooperation Policy,” making it a violation to have “pocket listings” not on the MLS so agents can see and show it. On our MLS that carries a $1,500 fine.

Winning a Bidding War Is Harder Than Ever for Buyers

It is a lot harder working for buyers these days. You’d be hard pressed to find a buyer’s agent who hasn’t lost more bidding wars than he has won for his clients. I don’t mind admitting that has certainly been true for me.

Last Sunday, however, I had a big success. My buyer fell in love with a patio home that backed to her alma mater, a Jeffco high school. Like her, the seller was a single woman, so maybe there was some sympathy there — I wouldn’t know.

It’s not accepted nowadays to present “love letters” from buyers, because they could lead to a fair housing violation, but it is okay to say things in a cover message with the contract written by me, not the buyer, so I made a point of saying that my buyer was an alum of that high school and relished buying this house. I don’t know if that helped either, but it didn’t hurt and it didn’t constitute a fair housing violation.

What did help was that I learned from the listing agent that while the seller was moving out of state, she was going to move her furniture to a friend’s house in the greater metro area. We have a moving truck which we make available to our buyers and sellers, but we can also offer it free to another agent’s client if it will help us win a bidding war. That did the trick for my buyer in this situation, and it also saved her several thousand dollars. Here is how and why.

In our offer we added an “additional provision” that Golden Real Estate (not my buyer) would provide totally free moving of the seller’s furniture anywhere in the Front Range, using our own moving truck and personnel, moving boxes and packing material.

Then, instead of a typical “escalation clause” offering to beat any competing offer by one or two thousand dollars (or more), I wrote that “buyer requests the opportunity to match any competing offer in order to retain for the seller the above mentioned totally free moving benefit.”

It worked. We were told the dollar amount of the best competing offer and were allowed to match, not beat, it. My buyer is now happily under contract for her dream home.

Any agent could make the same offer on behalf of his or her buyer, paying for the cost of moving. It’s just that we have the economy of having our own truck and moving personnel.

Since I’m often on the listing side of a bidding war, I have seen other strategies used by agents hoping to win a bidding war for their clients. A common one is to make a quick first offer that is substantially over the asking price but with an early acceptance deadline, hoping to get it under contract before anyone else can submit. This can pose a dilemma for the listing agent when his strategy, like ours, is to wait four days so that every possible buyer gets a change to compete.

Agreeing to accept an early offer like that should be the seller’s decision, however, not mine. Yes I gave my word that we would not sell the home in less than four days, but now I modify that promise by saying that, “in the event the seller wants to accept a particularly attractive early offer, we will give sufficient notice to every agent who has set a showing so that they can accelerate their showing and offering schedule.” We don’t want any buyer or their agent to be blindsided. As we like to say, “the only way a buyer will lose out is if he or she drops out.”

Real Estate Bidding Wars Are Not Abating

This is my monthly update on the real estate bidding wars. This week I chose to analyze the closings that occurred last Thursday, June 10th, to see how the bidding wars have evolved over the past four weeks. The source for this monthly analysis is REcolorado.com, the Denver MLS.

As I did in previous months, I limited my analysis to sales within a 15-mile radius of downtown Denver. I limited my search to homes, condos and townhouses that were on the MLS at least one day and not more than 6 days before going under contract. Those are the homes with bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more.

As you can see in this chart, the bidding wars only took off in earnest during February 2021, and they have kept accelerating month by month, enough that it raised the average ratio of closing price to listing price over all sales, not just the homes which sold in six days or less.

On June 10th there were 40 closings up to $500,000, compared to 44 closings on May 13th. The median home sold for 6.2% over its asking price, compared to 8.7% on May 13th. The highest ratio this time was 19.6% for a condo in Golden compared to 15.7% on May 13th for a home in southwest Denver. Only one listing sold for the asking price, and only two sold for less than listing price.

There were 37 homes that closed on June 10th for more than $500,000, compared to 56 homes on May 13th. The median home in that group sold for 7.7% over its listing price, compared to 8.1% on May 13th. Only three sold for the listing price, and none sold for less than the listing price. The highest overbid in this group was 20.9% for a one-story home in Lakewood on June 10 compared to 29.4% on May 13.

To have a statistically significant number of closings over $1 million, I analyzed the 82 such closings over a longer period — June 1-13. The median closing for those high-end homes was 6.1% over listing price, compared to 6.0% in May. Four homes sold for the listing price and 9 homes sold for less than the listing price. The highest overbid was for a 1979 ranch-style home in Jeffco’s Sixth Avenue West subdivision, which was listed at $1,080,000 and sold in 6 days for $1,575,000, 45.8% over listing price.  

I’ll repeat this analysis on July 15.

An $850,000 Home In Littleton Just Sold for $1.1 Million

How High Are Bidding Wars Pushing Up Home Prices?

This is a reprise of my article on April 22nd, when I took a snapshot of closed listings on Friday, April 16th.  This week I did the same analysis, and the day I chose was last Thursday, May 13th, to see how the bidding wars have evolved in just the last four weeks. The source both times was REcolorado.com, Denver’s MLS.

As I did in April, I limited my analysis to sales within a 15-mile radius of downtown Denver. That takes in an area from Broomfield to Highlands Ranch and from Golden to Aurora. It does not include the City of Boulder.

I limited my search to homes, condos and townhouses that were on the MLS at least one day and not more than 6 days before going under contract. Those are the homes with bidding wars. I divided the results into homes which sold up to $500,000 and those that sold for more.

On May 13th there were 44 closings up to $500,000. The median home sold for 8.4% over its asking price. On April 16th, there were 48 closings, but the median home sold for “only” 4.7% over its asking price. The highest ratio this time was 15.7% for a home in southwest Denver that sold in 4 days.

There were 56 homes that closed on May 13th for more than $500,000. The median home in that group sold for 8.1% over its listing price.  On April 16th there were 68 such closings, and the median home sold for 8.3% over asking price, so little change there, but the highest overbid in this group on May 13th was 29.4% over listing for an $850,000 home in Littleton’s Sundown Ridge, which sold in 2 days for $1.1 million.  On April 16th, the highest overbid was “only” 18.8% over asking price for a home in Westminster. On May 13th, there were four homes with an overbid higher than that.

To have a statistically significant number of closings over $1 million, I analyzed the closings over a longer period — May 1-15. The median closing for those high-end homes was 6% over listing price. The highest was for a 1991 home in Denver’s Hyde Park at Polo Club subdivision, which was listed at $1,575,000 and sold in 6 days for $2,225,000, 41.3% over listing price.  In the first half of April, there were only 68 closings over $1 million, and the highest overbid was 24.9% over listing price. This time there were six closings with an overbid higher than that.

In my April analysis I predicted that the overbids would get even more intense, and that has proven to be the case. I’ll keep up this analysis in coming months. Stay tuned.

1,200+ Metro Area Homes Are Sitting on MLS – No Bidding Wars for Them

No buyer wants to be in a bidding war, but there are many listings on the MLS that aren’t selling, and submitting an offer won’t put you into a bidding war. You might even buy them for less than their listing prices.

As I write this on Sunday, there are 1,241 active (that is, unsold) listings on the MLS within 25 miles of downtown Denver that have been active 10 or more days. There are 764 that have been active a month or longer, and 483 that have been active 60 days or longer. And it’s not as if those 483 listings are in the boondocks. The map shown here (from REcolorado) shows where they are.

483 Homes on the MLS for 60 Days or Longer

As I’ve written before, any agent can set you up to receive only listings which have been on the MLS a certain number of days. It is a good way to avoid bidding wars.

    Let me or one of my broker associates below know if you’d like us to set up an email alert like that for you.

Jim Smith, 303-525-1851

Jim Swanson, 303-929-2727

Chuck Brown, 303-885-7855

David Dlugasch, 303-908-4835

Ty Scrable, 720-281-6783

Andrea Cox, 720-446-8674