Golden Real Estate is pleased to be hosting a free Covid-19 Vaccination Clinic in our parking lot today, Saturday, July 3, 2021, during the monthly SuperCruise event. The clinic closes at 7 pm. If you haven’t been fully vaccinated yet, please come by! It’s free!
As 2020 limps to an end, we face so many unknowns. How bad will Covid-19 get before it’s brought under control? How bad will the wave of evictions be when the moratorium on them expires later this month? How many home owners will be forced into foreclosure? What relief will we get from our lame duck Congress? If Republicans retain control of the U.S. Senate, how much will Joe Biden be able to accomplish? For that matter, will there be a peaceful transfer of power?
Despite these unknowns, I’ll offer here some insights of my own but also share what I’m reading in trade publications and news services.
Realtor.com has released a “2021 housing forecast” that predicts home prices, which have spiked during the pandemic, will continue to rise through 2021, to the detriment of first-time home buyers. The historically low mortgage rates will also tick up in 2021, further reducing affordability. The report predicts a rate of 3.4% by year end — still quite low, but an increase over current rates well below 3%.
To quote realtor.com, “folks shouldn’t hold their breath for a bargain.”
The report predicts that the double-digit appreciation seen nationwide in 2020 will decline to a still high 5.7% in 2021.
That said, there remain “hordes of buyers” who can still buy homes and who are bidding up the prices of the homes that do come on the market.
As I’ve reported previously, the inventory of active listings is not low because sellers are reluctant to sell. Sellers know that now is the best time to sell. We are seeing record numbers of new listings, but they sell so quickly that the number of active listings remains low. And, of course, that dynamic is creating bidding wars which are driving up prices, beyond what comparable recent sales would justify.
That raises the question of how homes can appraise when they are bid up past their market value. The answer is two-fold. First of all, the winning bidders are often the ones who waive appraisal, and, secondly, an appraiser has to consider the existence of competing offers in determining market value. If a home sells for $30,000 over what it should appraise for based on recent sales of comparable properties, but the appraiser is told about losing bids that are as high or nearly as high, those other offers establish market value. Even if the appraisal then comes in below the contract price, the seller is typically able to stand firm, forcing the winning bidder to drop his appraisal objection or make room for buyer #2 to step in at the same price. This is bad news for buyers, but excellent news for sellers.
Getting back to the predictions for 2021, I believe that the Covid-19 effect I have described previously will continue well into 2021 and possibly beyond. That effect is a mass migration from crowded cities with high-rise condo and apartment buildings to single-family neighborhoods throughout Denver and the other metro counties.
That migration will continue to drive down prices in high-rise buildings while driving up prices in townhomes and detached single-family homes.
I should note, since I’m featuring a condo in Belmar Plaza this week, that the Covid-19 effect should not apply to that low-rise (5-story) building. A $690,000 condo there went under contract this week. On multiple visits to my own listing, I can’t recall sharing the elevator with another tenant more than once, and the stairs are an easy option since it’s only on the second floor.
As I write this, the real estate market is a tale of two cities — or, more accurately, a tale of cities vs. suburbs. Because of the virus, Americans are “getting out of Dodge,” leaving the congestion of multi-story buildings and moving to the suburbs and the countryside.
The statistics tell the story. In a recent 30-day period, 46% of the sales in Jefferson County closed above their listing price after being on the MLS for a median of 5 days. It was quite the opposite in downtown Denver. There, during the same 30-day period, 87% of the listings (primarily condos in elevator buildings) sold below their listing prices with a median time on the MLS of 24 days.
It’s the same story nationwide, and for good reason. People are fearful of catching Covid-19, and they know that being in close quarters can’t be good. In the suburbs they can take their dog for a walk without using an elevator and without having to come within 6 feet of another human being. (I’m describing my own life here — I walk my dog Chloe every morning on a one-mile circuit around my subdivision and never come in close contact with the neighbors I encounter. Because of that, I don’t even need to wear a mask on these walks.)
We keep hearing that the inventory of homes for sale is at record low (except downtown), but that’s only true because homes are going under contract so quickly. The chart below, generated on REcolorado.com, tells the story well.
Using the most recent full-month MLS statistics for Jefferson county (September 2020), you can see that we actually had more new listings this September than in any of the five previous Septembers, yet the number of sold listings was nearly the same, so there was no way the number of active listings was going to increase and was, in fact, lower by far than the number of active listings in the five previous Septembers. The median time on the MLS of 5 days tells you why.
Moreover, the average ratio of sold price to listing price in Jeffco was 100%, as it had been every prior September except in 2019, and the price per finished square foot has continued to soar. The situation is similar in all suburban counties.
Clearly, the takeaway from this analysis is that if a homeowner is thinking of selling their home anytime soon, he or she would be smart to put their home on the market right now. Don’t think that just because winter is coming that buyers aren’t actively looking for homes. Last week in this column I promoted a 1973 ranch in Arvada that was “not particularly updated.” It didn’t even have a garage door opener for its one-car garage, and it had a backyard clothes line instead of a dryer. Yet that home attracted over 50 agent showings in 72 hours and 11 offers by Saturday evening, when it went under contract for $30,500 over its listing price.
A recent real estate industry article predicted a terrible winter for us real estate agents because of low inventory, but there are just as many homes for sale as ever — maybe more. You just have to act quickly because they are selling right away.
Another recent listing of mine also illustrates how hot the market is. The very first offer for my $530,000 tri-level listing in central Lakewood came in at $585,000, apparently from a buyer who had lost out in previous bidding wars and didn’t want that to happen again. The strategy worked, because no other agents would submit an offer when they learned that we had one that was $55,000 over full price.
Are you wondering what you might be able to get for your home? It costs you nothing to get a comparative market analysis from a real estate agent, and, regardless of where your home is, my broker associates and I are happy to provide that for you. Call us!
MyMove.com is the online replacement of the change-of-address form you probably filled out at the post office the last time you moved. While the post office benefits from having the move process computerized, the website makes money by accepting advertising and earning a royalty on moving services which are purchased on the site.
Through their exclusive partnership with the USPS, My-Move also aggregates data from those online change of address forms. Pew Research Center then surveys a sample of those movers to find out why they moved.
In prior columns I speculated about the out-migration from downtown Denver to Jefferson County and other suburbs by “urban cliff dwellers” (as my mother called them) fleeing their congested high rises to reduce their exposure to the virus. An October 14th article on MyMove. com confirmed that trend nationally, as reflected in the chart below. Note: The numbers are for net migration between Feb. 1, and July 31, 2020, subtracting the number of moves into each city from the number moving out of that city. Therefore, the number of moves out of each city is actually higher than the number shown in the chart.
The following is excerpted from that Oct. 14 MyMove article.
A Pew Research Center study conducted in June looked at almost 10,000 U.S. adults to understand COVID moving trends better….
About a quarter (28%) told us they chose to move because they feared getting Covid-19 if they stayed where they were living… About a fifth (20%) said they wanted to be with their family, or their college campus closed (23%). A total of 18% gave financial reasons, including job loss.
In reading the chart, it should be noted that “New York, NY” is the postal address for Manhattan, not all five boroughs of New York City, which is why Brooklyn has its own number. Also, not shown is that the biggest destination of New York out-migration is Brooklyn, and vice versa. Since only 28% of movers cited the virus as their reason for moving, that fact does not diminish the impact Covid-19 played in this year’s moves.
The change-of-address form asks whether the move is permanent or temporary, and although the number of permanent moves increased by about 2% year-over-year, the number of temporary moves increased by nearly 27%. Some of those moves were to second homes. Others were students who left campuses which had switched from in-person classes to online learning.
Since an estimated 70% of workers were able to continue working from home, those people who had a place to which they could relocate made the move quickly — likely to a place that was not subject to the lockdowns of their home city. The highest spike was in March, falling slightly in April. As reflected in the above chart, small cities were the primary recipients of this in-migration, which supports what I have already observed, that downtown Denver has a buyer’s market while the suburbs have a seller’s market.
Reflective of that, my most recent closing was of a tri-level home in Lakewood, which I listed at $520,000 and which sold immediately for $579,000. In Jeffco, 46% of the closings in the past 30 days sold for more than their listing price with median days on market of 5. Meanwhile 87% of the homes (mostly condos) that sold in downtown Denver, Lodo and River North during the same 30-day period sold for less than their listing price, with median days on market of 24.
With the continued high unemployment rate and the expiration of Pandemic Unemployment Assistance (PUA), many homeowners are hurting, so it makes sense that we may have a foreclosure crisis in our future.
CoreLogic reported recently that back in June (when the Feds were still sending $600/week in PUA to Americans) the share of mortgages with payments 90 to 119 days late had already risen to 2.3%, “the highest level in 21 years.” A rate that high could result in a foreclosure crisis, the report said. Not only could millions of families potentially lose their home, but that would also create downward pressure on home prices.
But I see the situation differently, and after consulting with Jaxzann Riggs of The Mortgage Network, here’s why I don’t expect that flood of foreclosures.
First of all, foreclosure should only happen when a seller owes more on their home than it is worth. That’s because sellers lose all their accumulated equity in a foreclosure, and most people have accumulated a lot of equity thanks for the sellers’ market we have been experiencing.
Secondly, federally mandated forbearance is in effect, which is unlike the forbearance which delinquent borrowers may have enjoyed in the past. Under the current plan, lenders add extra payments at the end of the loan instead of requiring any kind of catch-up payments. This mandate could be extended, too.
The only people likely to face foreclosure will be those who recently took out 100% VA loans or 96.5% FHA loans or conventional loans with only 3% down payment, and for whom there is hardly any equity to lose in a foreclosure action.
Being on forbearance doesn’t affect one’s credit rating even though you are not making payments (again, part of the federal mandate), but once you resume payments, you need to make a minimum of three on-time payments to qualify for a Fannie Mae or Freddie Mac loan, which will restrict your ability to sell your home and purchase a replacement home. Some lenders require six months post-forbearance loan payments.
That, too, will slow down any surge in what are known as “distressed listings.”
An article I just read in the Colorado Sun, written by Shelly Miller, Professor of Mechanical Engineering at CU-Boulder, tells us something really important — that keeping the concentration of CO2 (generated by human breathing) under 600 ppm in indoor spaces has been shown to dramatically reduce the spread of Covid-19. Here’s a link to the source article:
Prof. Miller receives funding from the National Science Foundation, Environmental Protection Agency, Centers for Disease Control, National Institutes of Health, and additional nonprofit organizations. She is affiliated with American Association of Aerosol Research and the International Society of Indoor Air Quality and Climate.
Thanks to reader Jen Grauer for bringing this to my attention, and I’m happy to bring it to yours!
At Golden Real Estate it has been our practice since the beginning of the virus to keep our front doors open so that we and our visitors don’t have to touch them, but now we realize that this practice also makes our indoor air safer. We also have a CO2 monitor, which we’ll now plug in and display prominently in our office.
While residential real estate is booming, the prognosis for commercial real estate must be pretty bad, especially since the Covid-19 pandemic has inspired many companies, big and small, to let their employees keep working at home permanently. And, of course, many companies, especially in the hospitality industry, have called it quits. Also, the oil and gas industry, a big part of Colorado’s economy, has suffered greatly from the reduced value of oil on the world market and we’re seeing big cut-backs in their operations. BP, for example, recently announced a 15% cut in personnel by year’s end.
This means that there will be a lot of vacant office space, and many commercial landlords, seeing a shrinking demand for commercial space and a rising demand for residential units, are thinking of converting their buildings to residential use.
This trend could “free up a lot of commercial space, which can be converted to affordable housing,” HUD Secretary Ben Carson told Fox News in a June interview.
An Aug. 12 article by Clare Trapasso on realtor.com is headlined “As the Pandemic Empties Office Buildings, Can Those Spaces Help Solve the Housing Crisis?” The article quotes realtor.com senior economist George Ratiu as saying, “Office-to-residential conversions would be a win-win solution in some cities where you’re seeing declining lease renewals and a massive shortage of housing.” The building shown here, which once housed the office of East Ohio Gas, is now an apartment building.
I have witnessed such conversions — in both directions — first-hand, long before Covid-19. Back in 1991 I purchased a building that had been built in 1905 as a 28-unit apartment house. It had been converted to an office building before I bought it, but after I sold it in 2007, it was converted back to apartments.
During Denver’s 1980s oil bust there were many vacant office buildings in Denver and elsewhere, but they weren’t converted to residential use because the residential real estate market at that time was also depressed. Now, with the residential real estate market booming more than ever, I fully expect to see some of those high-rise office buildings converted to apartments or condos in coming years, some of them as mixed use (only partly residential).
The fact that we’re still in a seller’s market puzzles many real estate professionals, but there are reasonable explanations, which Realtor.com did a good job of describing in a July 13th article by Clare Trapasso.
The headwinds in this market are strong and numerous. We have a lingering and maybe worsening pandemic, staggering unemployment numbers, and a contentious presidential campaign, made even more contentious because of our national reckoning about systemic racism. How does one account for such a strong real estate market, and when will that market soften?
First let’s look at our local numbers. In my July 9th column, I showed statistically how the market had surged in June. As I write this on Monday evening, there are 4,903 active listings within 20 miles of the State Capitol, but there are 7,720 listings under contract, 3,905 of which (or 50.6%) went under contract in 7 days or less. A total of 5,219 listings closed in the last 30 days, 2,679 of which (or 51.3%) went under contract in 7 days or less and 1,895 of which (or 36.3%) sold for above full price, likely with competing offers.
So, yes, we are still in a seller’s market — but how can that be, given all that’s going on?
To quote the realtor.com article, “The housing market is back — and then some.”
Nationally, according to realtor.com, median home prices rose 6.2% year-over-year for the week ending June 27th. According to REcolorado, the median sold price for listings within 20 miles of the State Capitol that same week was $440,000, with 49.9% of them selling in 7 days or less, compared to $418,000 for the same 7-day period a year ago, when 44.5% sold in 7 days or less. That’s a 5% increase in median price year-over-year.
To quote the realtor.com article, “Homes are selling faster than they did in 2019, when no one had heard of Covid-19. And bidding wars are back as first-time and trade-up buyers who have lost out on other homes slug it out.”
The contrast between this market and the market during the “Great Recession” of 2008 couldn’t be sharper. Back then, there was a glut of housing and few buyers. Today, the situation is reversed, with fewer listings and a glut of buyers. Because the 2008 crisis was caused by the subprime mortgage scandal, the glut of housing was made worse by a flood of foreclosures.
Quoting further from the realtor.com article, “To be sure, there are plenty of danger signs ahead in this economy, including continuing historic levels of unemployment and rising coronavirus infection rates in many parts of the country. But, for now, real estate is bouncing back much quicker than other bellwether industries. The reason: After months on hold, Americans are beginning to feel more confident about the idea of buying or selling a home.”
The article quoted a Fannie Mae survey of 1,000 participants, showing that 61% said it was a good time to buy and 41% said it was a good time to sell. And that survey was taken before mortgage rates dropped to under 3%, which happened just last week. As a result, we can expect the real estate market to be even more supercharged in the coming weeks. Already, mortgage applications for home purchases had risen 33.2% year over year in the week ending July 3rd, according to the Mortgage Bankers Association.
Lower interest rates mean lower mortgage payments by hundreds of dollars, which instantly increases the affordability of homes, and buyers understandably believe they are smart to buy now before the rates rise again, as they surely will.
The low interest rates also make the decision to buy more compelling for renters burdened by the still high cost of renting in the Denver market. This is particularly compelling for white-collar workers who were not furloughed or laid off during the pandemic and may have money in the bank for a down payment.
Another factor which I mentioned in my earlier column is the number of workers who started telecommuting because of the pandemic and whose employers said they could keep telecommuting even after it’s safe to return to the office. These people are in a buying mood as they look to move further from the congestion of downtown apartments or condos where going outside involves a greater risk of Covid-19 infection. They also saved a lot of money (as Rita and I did) by eating more home cooked meals because restaurants were closed. And Netflix costs a lot less than going out to the movies or the theatre, to say nothing about the savings on popcorn made at home or purchased at the supermarket!
Yet another factor is the increase in divorces and separations resulting from forced home confinement. I was amused to note the increase in TV commercials by divorce attorneys during April and May.
Despite the best efforts of state, local and federal governments, there will surely be people who are suffering financial hardship and have had to put their dreams of homeownership on hold. I wish them well as they dig themselves out of this terrible situation.
For those who are surviving Covid-19, however, and don’t get sick from it in the coming months, the continued record-low interest rates are making home purchase more attractive and more affordable.
As you’ve no doubt heard, the Federal Reserve has plunged hard into softening the impact of the virus and its attendant effects on the economy by reducing the Fed Funds interest rate used by banks to near zero. While this rate is unrelated to mortgage rates, we are also seeing those rates staying below 4% and approaching 3%, which is propping up the real estate market in a big way.
People who can afford to buy a home and have the income to qualify for a mortgage are getting off the fence. This is evident from how many homes are going under contract quickly, often with competitive bidding.
In the first 10 days of May, there were 2,306 homes within 25 miles of the State Capitol entered on Denver’s MLS. 615 of them were under contract by May 10th. Another 171 homes were entered as “Coming Soon” as of this Tuesday.
While that’s less than the first 10 days of May 2019, when 3,348 homes were entered on the MLS and 795 of them went under contract by May 10, it’s still an impressive amount of activity, and is probably due in part to the excellent mortgage situation.
Another factor that will stimulate purchasing among the wealthy is that the stock market has recovered more than half of its early losses due to the virus. That makes it more likely that investors would be willing to liquidate stocks to finance a cash purchase of real estate.
In April 2019, about 48% of homes sold at or above their asking price, and 46% of them sold in a week or less. This year’s performance is better. Of the homes that closed during April 2020, about 58% sold at or above their asking price, and about 62% sold in a week or less. Those statistics tell me that we have a pretty active sellers market, which stands in contrast to the gloomy economic situation caused by Covid-19.
It’s hard to believe that the real estate market will tank later this year if it is not tanking already.
I’m seeing that dynamic myself. As of this writing, all my own listings are either under contract or closed, including the Wheat Ridge home featured as “coming soon” a couple weeks ago. That $550,000 brick ranch was only listed as “active” on the MLS last Tuesday, and showings didn’t begin until Saturday, but our first offer came in on Sunday, and it was under contract at better than full price by Tuesday morning.
By JIM SMITH, Realtor(r)
Sellers who had been holding back during most of April put their homes on the market during the calendar week ending Saturday, May 2nd. And showings of listings also surged.
Altogether, 1,648 homes within 25 miles of the State Capitol were listed on Denver’s MLS between Sunday, April 26th and Saturday, May 2nd. That’s pretty close to the 1,885 number entered on the MLS during the same 7-day period in 2019, and more than double the 819 homes listed two weeks earlier. (During the week of April 19th to 25th, only 993 homes were entered on the MLS.)
Of those 1,648 listings, 29 were withdrawn from the MLS by week’s end for unknown reasons, and 10 were entered as “sold” without ever being active. That still left 1,609 new active listings, 511 of which were already under contract by Tuesday noon. That’s significantly above the 405 homes that went under contract by the end of the same period last year.
By the deadline for this column at noon on Tuesday, 233 additional listings had been entered as “active” on Denver’s MLS.
Not included in the 1,648 number are 176 listings that were entered on the MLS as “coming soon,” a status that didn’t exist until this year. One of those was my $550,000 listing at 2950 Jay St. in Wheat Ridge. It went “active” this week. Showings begin Saturday, May 9th. There are more pix on the website.
So, while we can hardly say life is “back to normal,” the real estate business is certainly showing renewed signs of life. Frankly, I’m surprised at the size of this surge in listings and signed contracts.
Like most agents, I have many buyers who have given me their search criteria, and the MLS automatically sends them alerts of homes matching those criteria as they are entered on the MLS. In my case, I have nearly a hundred such email alerts in effect. Since Gov. Polis replaced “stay-at-home” with “safer-at-home,” which allows in-person showings to resume, I have seen a spike in the number of buyers clicking on the links for listings sent to them. My listing at 1957 S. Taft Street in Lakewood saw five showings set on May 1st and 2nd alone. With this week’s price reduction, I wouldn’t be surprised if it goes under contract quickly.
Listing agents are expected to take extra precautions to protect the health of both buyers and sellers under the “safer-at-home” guidelines. For example, there can be no overlapping showings, and only 3 persons (typically two buyers and their agent) are allowed in a listing at one time. Our showing service, ShowingTime, is enforcing these rules by not allowing overlapping showings to be set.
As a listing agent, it is my responsibility to sanitize a home between showings, which I do by using Clorox wipes on all hard surfaces that visitors might touch, such as door handles and light switches. I leave the lights on and most doors, including closet doors, open or ajar, so that touching them is minimized. If the home is not vacant, sellers can perform these safety functions themselves.
Buyers and their clients are asked to wear face masks and gloves and to wear booties, which they’re asked to take with them when they leave. By following these guidelines, agents and their clients can feel as safe as, or safer than, for example, at a supermarket.